Equity markets caught in the cross-fire - AmpGFX

Greg Gibbs, Director at Amplifying Global FX Capital, suggests that the equity market response from the Trump win has been varied and some but not all emerging market equities have weakened.

Key Quotes

“Latam equities have been weak, led by Mexican equities, reflecting Trump threats to trade and immigration. Asian equities have also tended to be weaker, reflecting the importance of trade in the region directly and indirectly to the USA.  However, Emerging European equities have strengthened, led by Russia, on hopes that a Trump led USA will help mend political relations with Russia, perhaps easing trade and finance restrictions.”

“Major economy equity indices are generally stronger since the Trump election.  In the case of Japan this, to a large extent, reflects the sharp fall in the JPY.  GBP, in contrast, has been stronger, dampening the UK equity market.  Broadly speaking, equities are still little changed in recent months.”

“There has been considerable sectoral diversion in the equity market.  The big winner has been financial sector equities.  This reflects the sharp rise in yields and yield curve steepening that has improved the profitability outlook for banks.”

“Furthermore, US bank equities have benefited from a Trump policy to revamp Dodd-Frank and ease restrictions on banks.  There is speculation that Trump will name Jeb Hensarling as Treasury Secretary. Hensarling has pursued rolling back Dodd-Frank from his position in the House Financial Services Commission. Trump has employed Paul Atkins on his transition team to advise on financial regulation policy. Atkins is seen as favoring less regulation.”

“Global material equities have also lifted been lifted by the prospect of more infrastructure spending.  However, info tech shares have lagged recently, fearing interference to global trade from Trumps anti-trade rhetoric.”