US: a new wind blows

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In the United States, Donald Trump surprised the pundits by getting elected to the White House. Confounding all polls and forecasts of a Clinton victory in the run-up to election day, it soon became apparent that she was doing less well than had been expected. And it wasn’t just the presidency, the Republicans also took control of both houses of Congress.

After the fiery campaign rhetoric, Trump’s conciliatory language post-election quickly reversed an initial trading sell-off, with investors increasingly eyeing the advantages of his plans for the US economy. Ben Steinebach Ben Steinebach Head of Investment Strategy

Importantly, this should help President-elect Trump put in place much of his election programme. His campaign saw him take issue with many points of current policy, ranging from immigration to trade protection to budget policies and foreign affairs. The crucial question is whether he will walk the talk or will adopt a much less blunt approach to actual policy-making. His key appointments should paint a much clearer picture, but, whatever he does, a new wind will blow after eight Obama years, with the White House expected to promote a much more inward-looking United States.

The Trump effect in the markets

After the fiery campaign rhetoric, Trump’s conciliatory language post-election quickly reversed an initial trading sell-off, with investors increasingly eyeing the advantages of his plans for the US economy. Possible beneficiaries include banks and insurers, as a President Trump is expected to water down stricter regulation, while rising yields also boosted the sector. If put into place, the President-elect’s infrastructure plans will require a great deal of money, and US ten-year yields moved back upwards of 2%. Meanwhile, rising rates squeezed more defensive dividend-paying equities, which were mostly swapped for cyclical stocks.

The battered healthcare industry also perked up, as Trump is reportedly less likely to interfere in drugs pricing. Base metals, concrete and steel companies saw their share prices gain significant ground on the expectation of increased infrastructure spending, and the Dow Jones Index touched fresh record highs. The US dollar also gained traction on the back of rising yields, which coupled with the relative calm in the financial markets to push down gold prices. Oil prices came under pressure in the week, mainly reflecting a rise in stocks.

Corporate results: a mixed bag

While this perfect election storm was raging, a gaggle of companies released their quarterly results. ArcelorMittal reported net income up on lower sales in the past quarter, with the bottom-line figure USD 680 million in profit, compared with a loss of USD 711 million in the third quarter of 2015. The steel giant benefited from improved economic conditions, even if excess capacity remains a concern across the global steel industry. China’s steel players, for instance, are selling their products at very low prices indeed. Maritime services provider SBM Offshore clocked up much lower revenues in the third quarter of this year than in the year-earlier period. It is still facing a low order intake in challenging market conditions caused by steeply lower oil prices among other factors. This sharply reduces the prospect of new projects, as clients put off their capital spending.

Locking in net profits of EUR 358 million, Aegon posted reasonable results although its solvency edged down in the third quarter. That said, the insurer’s figures were well ahead of expectations and it enjoyed price gains in excess of 10%. In Germany, Allianz stood out for its excellent numbers: Europe’s largest insurer saw its net income surge on the back of solid performances in its life and health insurance businesses. In the United States, Walt Disney’s record revenues caught the eye: a full-year showing of USD 55.6 billion, 6% ahead of 2015, thanks to an unparalleled contribution by its film division. Net income for the year increased by 12% to USD 9.4 billion, also a new record.

Full slate

Of course, investors will keep close tabs on developments in the United States in the week ahead, but next week’s diary also warrants some focus on macroeconomic data. In Europe, the slate includes figures for industrial production, economic growth and inflation. Similarly, the United States agenda will feature the latest on industrial production and inflation, while also showcasing retail sales, building permits, the Philadelphia Fed Report and the Empire State Production Index. Other areas of focus for investors are likely to include China’s industrial production and weekly oil stocks figures. The results season is drawing to a close, with only Home Depot, Wal-Mart and Cisco on the slate in the States, while Europe should still see results reports from RWE, Merck, Vodafone, Sodexo, ABN AMRO, KBC and Ahold-Delhaize.

Michael Nabarro Standing in for Ben Steinebach Head of Investment Strategy ABN AMRO


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