Martin Bruckner, Mitglied des Vorstands, Allianz Investmentbank AG, CIO Allianz Gruppe Österreich

The victory of Donald Trump in the presidential elections in the US has led to a significant change in sentiment on the stock markets. The initial negative reaction in the morning of the day following the Election Day changed during the day and since then we have had a very friendly development on the stock exchanges. The euphoria that followed can be explained by the fact that the market participants are in favor of deregulation and are expecting a program by the federal government to restore the partly ailing public infrastructure.

The President of the USA also focuses on a very restrictive and long-term disadvantageous foreclosure of the domestic market from its neighbors, especially in the field of international trade. Additionally, he also threatens to impose punitive tariffs on all countries which have a trade surplus with the USA. Since the US has trade deficits with nearly all major trading partners, the collection of tariffs would lead to higher prices in the long term and will inevitably lead to higher inflation.

The future policy of the US central bank is also the subject of intensive discussions in the market. How often and when will the FED under the presidency of Janet Yellen increase interest rates? The market anticipates two to three steps. This will be accompanied by an increase in the inflation rate due to underlying base effects from rising commodity prices.

Stock markets around the globe are currently favoring US stocks from sectors that are very heavily regulated, as well as looking at companies from the oil and gas industry, which are experiencing the best relative performance.

The year 2017 will also lead to potentially profound changes in the political landscape through a series of elections, starting in the Netherlands through France and Germany. This ensures that the year 2017 is strongly influenced by the political developments and, in addition to the hard economic facts; politics is very likely to play a part in the performance of stocks as well.

Martin Bruckner
Member of the Management Board
Allianz Investmentbank AG
CIO Allianz Group Austria
31 January 2017

Allianz Investmentbank AG
ÖVFA - Österreichische Vereinigung für Finanzanalyse und Asset Management


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