Trump and the anti-globalisation trend has two-faced impact on the markets

The Trump outcome on the markets is really two-sided. The market has for now mainly focused on the most evident and positive aspect: a fiscal stimulus, leading to higher consumption, growth and ultimately inflation, leading to higher profitability for banks, hence increasing lending activity and money velocity, again contributing to growth (and ultimately hyperinflation if let out of control, but this is too far away for the market to consider. Markets are short sighted, even more so since the Algos are here)

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The second aspect is the current anti-globalisation trends all around the world, which at this point is much more uncertain and farsighted, but could have a dramatic impact to global growth and the markets.

We can see that not all participated equally in the crazy post-election rally. Despite a new all-time high on the Dow Jones 30, only 23% of the index constituents printed fresh 52 week highs. For the SP500, it’s even less and the number of shares trading above their 200 day moving averages has steadily dropped since the index hit a record in August. Most notably we could see small caps strongly outperforming large caps. To see a sustained bullish market, we would need a broader market participation.

More specifically, companies that source the majority of their revenue within the US outperformed multinationals. The Brexit and Trump’s election may just be a commencement of a general anti-globalisation movement, Italy and France being next in line. Until we get more clarity on that front which will take some time, investors may continue to favour domestic stories over large cap multinationals.

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