In a scenario that may play out in the local market today, US equity markets displayed mixed reactions to the Trump themes of fiscal stimulus; inflation; de regulation and protectionism.
Overall earnings valuations on US markets are relatively “full”, especially given rising bond yields. Market gains are more likely to come from upgraded earnings outlooks than valuation expansion and here the picture is mixed. Banks, for example, may benefit from deregulation while exporters may feel the pinch of a stronger $US and are exposed to the risk of potential trade wars under Trump administration policies.
The firm open by the ASX 200 this morning masks mixed reactions to the Trump themes. The potential for a significant increase in US demand is a game changer for commodities like copper and is fuelling the rally in Australian mining stocks. Around a third of copper demand comes from construction and the US is the second largest consumer behind China. The possibility of a massive increase in US infrastructure projects over coming years will have a big impact on a market where reducing grades and delays in a number of major mining projects have tightened supply projections.
However, the story is not so rosy for the utilities and real estate sectors this morning. The last 24 hours have seen another sharp jump in bond yields which is putting pressure on stocks in these sectors.
CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
CMC Markets Singapore may provide or make available research analysis or reports prepared or issued by entities within the CMC Markets group of companies, located and regulated under the laws in a foreign jurisdictions, in accordance with regulation 32C of the Financial Advisers Regulations. Where such information is issued or promulgated to a person who is not an accredited investor, expert investor or institutional investor, CMC Markets Singapore accepts legal responsibility for the contents of the analysis or report, to the extent required by law. Recipients of such information who are resident in Singapore may contact CMC Markets Singapore on 1800 559 6000 for any matters arising from or in connection with the information.