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Fading equity investment optimism drives outflows higher as Trump takes office

Fading equity investment optimism drives outflows higher as Trump takes office

As Donald John Trump prepares to become the 45th President of the United States, media reports have been sharing the news that investor optimism has dipped sharply during the week leading up to his inauguration today.

It is believed that lack of certainty over key growth policies have driven equity outflows toward the $2.5bn mark during the week preceding Mr. Trump’s big day, smartly outstripping the previous week’s outflows of $250m.
Financial experts have been quick to underline that these are the highest outflow figures since ‘the Donald’ was elected in November 2016.
Initially, expectations of renewed growth under the incoming President’s leadership, coupled with more buoyant economic data, fuelled investors’ enthusiasm in the markets; however, Mr. Trump’s reluctance to be more precise about his future plans in relation to key growth policies, – fiscal expansion and tax cuts, for instance – derailed the rally as quickly as it had begun.
Whilst the President-elect frequently talks up a storm on Twitter, it’s his lack of ‘real’ policy assurances that have driven the markets to retreat somewhat. So far in 2017, investors’ have seen:
  • Financial sector equity funds, after enjoying 16 straight weeks of inflows, lose $750m globally during the past week alone
  • The S&P 500 slipping and sliding during the last two weeks
  • Bank stocks slumping by around 1% year-to-date
  • Gold being tipped to continue its roller coaster journey as the year goes by, before ending 2017 on a low
Good news came in the form of strong housing and labor figures, yet Fed chair, Janet Yellen felt the need to warn that the United States may be in for a ‘nasty surprise’ if policymakers resisted hiking interest rates again before too long.

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