Whilst the new year is still very young, 2017 headlines and markets continue to be dictated by President Trump.  

The following information does not take into account your personal objectives, financial situation or needs. You should consider if the relevant investment is appropriate having regard to your own objectives, financial situation and needs.

 

Markets in November and December of 2016 were driven by the ‘Trump trade’ – expectations of increasing spending on infrastructure and manufacturing leading to inflationary concerns and hence, the expectation of rising interest rates, particularly in the U.S.

This lead to a general rise in markets with sectors such as commodities and financials outperforming and an appreciation in the US dollar of almost +6% versus the Australian dollar (from the election result date to the end of 2016).  The U.S. share market (as measured by the Dow Jones Industrial Average Index) rallied over +6% in the same period and reached an all-time high on 20 December 2016.

The U.S. Dow Jones Industrial Average Index has continued to perform (up +1.5% year to date to reach an all-time high) in January albeit at a slower pace whilst the US dollar gains have largely reversed, falling -5.1% against the Australian dollar.  In comparison, the Australian share market as measured by the S&P / ASX 200 Index is basically unchanged in January (up +0.1%).

AUD vs USD 25 July 2015 to 25 January 2017

Source: Bloomberg

 

Why has this happened and what is the path forward for markets for the rest of 2017?

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