…And, they’re off!
Bullish sentiment helped world equity markets get off to a fast start last week. Just name a country or region – developed markets, emerging markets, the United States, Latin America, Asia, Europe, the United Kingdom – and it’s likely the area’s benchmark index may have been up for the week.
Not everyone was in the bullish camp, though. Barron’s reported:
“The market optimism is understandable. After a long spell of zero interest rates, a baton transfer from monetary manipulation to fiscal stimulus and pro-growth chutzpah can be an exciting regime change…But investors’ hopes could be misplaced. It would be one thing if there were shovel-ready infrastructure projects or proposed tax cuts on the table that could quickly boost spending. Instead, Republicans propose, for example, changing the basis for corporate tax from location of operations to location of sales. The aim is to encourage domestic production and exports, but the plan could hurt companies that import materials or goods. Will big importers like [big box stores] pass the tax hit onto consumers by raising prices?”
For contrarians, record highs for U.S. stock markets (both the Standard & Poor’s 500 Index and NASDAQ closed at new highs last week) and strong bullish sentiment (Barron’s reported, “The Investors Intelligence survey of newsletter writers showed the bullish herd swelling above 60 percent…”) are red flags, signaling an inflection point may be near.
No matter which camp you fall into, there is a lot of uncertainty. Which policies will the new administration pursue? Will China’s growth slow more quickly than expected? How quickly will the Federal Reserve raise rates? Will interest rates continue to move higher? Will a stronger dollar negatively affect emerging markets? In the face of so much uncertainty, it’s important to be diversified.
http://www.barrons.com/articles/cheering-and-fearing-the-post-trump-rally-1483767229?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-09-17_Barrons-Cheering_and_Fearing_the_Post-Trump_Rally-Footnote_1.pdf)
http://www.barrons.com/mdc/public/page/9_3063-economicCalendar.html?mod=BOL_Nav_MAR_hps (Click on U.S. & Intl Recaps, then on “Equities rise to the occasion”) (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-09-17_Barrons-Global_Stock_Market_Recap-Footnote_2.pdf)
http://www.barrons.com/articles/no-cigar-yet-dow-stops-short-of-20-000-1483767234 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-09-17_Barrons-No_Cigar_Yet-Dow_Stops_Short_of_20000-Footnote_4.pdf)