Pictet Group
Weekly house view | America first won, let’s hope it’s not America alone
The week in review
The election of Donald Trump ensured US equities had an excellent week, with the S&P 500[i] advancing 4.7% (in USD). The promise of tax cuts and deregulation, as well as the prospect of more deal-making and yield-curve steepening meant it was a good week for big banks and cryptocurrency (less so for renewable energy stocks). The Russell 2000[ii] small-cap index surged, helped also by another 25 bp rate cut from the Fed, while US credit spreads narrowed. After an initial sell-off, 10-year US Treasuries rebounded to finish the week with a decline in yields of 8 bps. Europe was out of favour last week, with the Stoxx Europe 600[iii] falling 0.8% (in euros). Despite disappointment about the details of China’s USD1.4 trn fiscal stimulus, the Chinese CSI 300 Index[iv] ended the week 4.9% higher (in USD).
Quote of the week
“America has given us an unprecedented and powerful mandate,” Trump said in a victory speech on Wednesday.
Key data
The US ISM purchasing managers’ index (PMI) for services soared to 56 in October from 54.9 the month before. The University of Michigan’s consumer sentiment went up from 70.5 in October to 73 this month while one-year inflation expectations fell from 2.7% to 2.6%. German industrial production fell 2.5% month-on-month (m-o-m) in September and was almost 5% down on a year before. German exports fell 1.7% m-o-m. French industrial production fell 0.9% m-o-m in September. Chinese exports surged by 12.7% year-on-year in October while imports fell 2.3%, expanding China’s trade surplus. The Caixin PMI survey of Chinese manufacturing rose to 50.3 in October from 49.3 in September, while the Caixin PMI for services rose to a three-month high of 52 last month.