STOCKS: US stocks had their biggest monthly gains of the year in November: The blue-chip S&P 500 index is up 5.9% for the month following Donald Trump’s election victory. The index is up an impressive 26% for the year. The technology focussed NASDAQ index and the small-cap Russell 2000 index are also at all -time highs. It is Trump’s plans for tax cuts and deregulation that could spur economic growth and corporate profits that is driving US stock market investment.
Indeed, some investors argue that US stock investment is the ‘only game in town’ if you exclude the likes of Bitcoin – another asset class boosted by Trump’s political return – European equities seem to have dim prospects right now with flat economic growth and their share of political discontent. UK stock markets too are also underperforming with individual and corporate confidence low on the back of a tough recent budget which reduced corporate profitability highlighted by a 2% rise in employer National Insurance contributions. Furthermore, all markets outside the US are faced with increased 2025 export (US import) tariffs further denting sentiment.
But, if everyone thinks US stock market investment is the only investment choice to make, history tells us that the crowd is rarely right…sometime we call this a ‘crowed trade’. Only time will tell.
BONDS: 3 themes
1)US: Trump’s re-election and his expansionary policies is viewed as mildly inflationary likely to slow down the pace of US interest rate cuts so bond yields have risen modestly overly the last few weeks (so bond prices have fallen). The US 10-year government bond yields 4.30%
The US Dollar has strengthened over such outlook for US interest rates to stay relatively high.
2) The UK budget is also viewed as moderately inflationary, so like above, expectations around interest rates cuts have fallen and bond yields have risen. The UK 10-year government bond yields 4.40%
3) French bond yields have risen unusually above those of Greece with the 10-year bond yielding close to 3%. This is nearly 1% above Germany. The biggest margin for a decade. It is the political turmoil/impasse in France which is driving this.
COMMODITIES:
Oil is very static around 75 dollars per barrel with 2025 and 2026 global growth prospects not supporting higher prices.
Gold is close to all-time-highs at $2,650 per ounce but struggling to make further gains if interest rates stay high around the rest of the world (remember gold is a non interest bearing asset).
With Trump soon to be in place, about the only thing we can bank on is market volatility.
NOTE: Nothing in this article represents investment advice.
