Investors continue to put risk back on as we see large flows of money entering the USD and global equities at the expense of developing economies and safe haven assets such as Gold, EUR, JPY and CHF.
The rise in equities has been largely driven by Trumps pro-business stance in which he is set to loosen regulations and taxes to spur growth. Most notably is the news that Trump`s transition team will be looking to dismantle the Dodd Frank act which was put in place to regulate banks in the aftermath of the crash. This has resulted in large gains in the share price of banking giants such as Goldman Sachs and JP Morgan who lead the way, followed closely by banks in Europe, UK and Japan. Though we have seen a rise in the DJIA and the S&P500, the NAsdaq100, which is composed of mostly tech stocks, has taken a hit as the sector depends largely on global trade which the newly elected President has not yet touched on. This has resulted in APPLE losing 2.79% and FB, the social media giant, losing just under 2% on the day.
The status quo is expected to remain, with stocks at large gaining, for as long as their is no news or data to sour sentiment. Investors will also be aware of the upcoming weekend and that there might be important releases made which will impact markets on Monday`s open so we might see some profit taking as risk is taken off the table.
Today's Prelim UoM Consumer Sentiment, expected at 87.4, will also be closely watched as markets look to see how consumer confidence is fairing. If the figure is better than expected, we would see US assets gain as the USD and equities attract more foreign investments at the expense of safe haven assets. However, given that the figure was constructed during a very uncertain time with the upcoming elections, we might see a slump in consumer confidence which will act as a catalyst for profit taking in various assets.