Will Trump Deliver on His Promises? Or will this be the end of the Bull Market

President Trump’s promises for tax reform, infrastructure spending and repatriation of heavy industry that was previously outsourced, bolstered both consumer confidence and market confidence. Yesterday though the Trump administration’s inability to pass legislation restructuring health-care, confidence in his promises have waned. The effect saw not only U.S. markets drops but even the STOXX Europe 600. Does this spell the end of the bull market of the past 3000 days?
Tax Reform

On speculation, analysts have mentioned that tax reforms would be much more difficult to rally support for compared to health care. The effect of these speculations resulted not only in the drop of U.S. index S&P 500 futures by 1% but a reflection or mirroring in the Stoxx Europe 600 futures with a smaller but still significant 0.7% drop. Even so, European stocks are coined to outpace U.S. stocks in the coming days
Dollar slips too but Euro Rises

Although an obvious correlation, the drop seen in the market indices futures was also observed in the dollar’s value. Would this indicate further volatility in currency pairs involving the dollar? There is a high possibility. On the other hand this wide felt slump saw the rise of the value of haven currencies such as the Yen and Gold/USD pair. The value in Gold in fact saw a increase of 1% on the 27th of March (reaching its November value of $1258.48) – concurrent with the voting down of the health-care reformation bill. The Euro rose in light of Angela Merkel’s party victory in the Saarland state, giving indications of the outcome of the Chancellors’ election.
More Volatility Ahead

Although volatility is expected in currency pairs involving closely tied base currencies such as the USD, GBP and EUR, the coming months might prove to be even more volatile due to important upcoming economic and political events. Some of these events include:
The beginning of the two-year process of negotiations for Brexit. Although PM Theresa May wants the split and trade agreement negotiations to be simultaneous, the EU is wants to negotiate the split first and then start talks regarding trade agreements.
On the same day as the beginning of the end of the UK’s part of the one currency club of the EU, proposals for the wall between Mexico and the U.S. are due.
Interest rates will be set by Thailand, South Africa and Mexico
Tumultuous Samsung will attempt to recover from the Note 7 exploding battery debacle with the introduction of their latest smartphone the Galaxy S8.

This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.

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