Optimism in The Markets

Weekly Economic Review – Optimism in The Markets Due to Trump Unexpected Download in Income Taxes


Continuing the positive trend in global stock markets. US leading indices rose by an average of 1%, European indices were stable. Emerging Market index rose by 1.2%. Since the beginning of the year, the global stock index rose at 4%.

The fourth-quarter earnings season in the US So far, 753 companies have reported S & P 500 when 75% beat earnings estimates and 50% of net sales projections. Companies are expected to show growth of 3.8% in sales and 4.1% in net income versus the same quarter last year.

Fed interest estimates are that the Fed will wait with further interest rate increase until June when Trump’s economic programs will become clearer.

Government bond indices were generally positive, the yield on US government bonds fell from 2.46% to 2.41%. A similar trend was seen in the UK and Germany. The corporate bond indices were positive this week.

The positive economic indicators this week were also in most of the world economies, price data show a moderate increase in inflation in the US, import prices and export prices rose by 2.5-3.5 percent this year, financial companies continue to be mostly positive earnings as well as employment data.

Simultaneously the consumer confidence index published was relatively weak, the trade deficit the US has increased. data released in China, are very good, an increase in exports of 7.9% and an increase in imports of 16.7%, the trade balance of China continues to be positive.Industrial output in Britain showed improvement, An annual increase of 2.1%, the Japanese currency depreciated and the stock market where he climbs.

Industrial output in Britain showed improvement, An annual increase of 2.1%, the Japanese currency depreciated and the stock market climbs.

The American president continues to post messages that in the meantime have a positive impact on the market. He plans to publish his reform plan to reduce significantly the tax of companies and independent.

This week Trump expressed regarding the shortening of the required regulatory approval of new drugs, which contributed to a jump in shares of pharmaceutical companies.

It also reflects the positive attitude in relation to economic ties between the US and Japan. At the same time, Goldman Sachs publishes warnings about Chinese American “Customs War”. Economists of credit rating companies concerned of a damage to world trade due to Trump’s plans in the field of “customs wars” and exchange rates.

Continued improvement of economic activity in the Eurozone , the index of economic confidence fell slightly in February but remains close to its peak.

Quantitative easing is not expected to end soon and will continue according to the words of the European Central Bank, Draghi, at least until there is an upward trend in core inflation.

Greece government bond yields rising to 10.5% and increasing fear of a financial crisis there because it does not fulfill the requirements of the EU to reduce government spending.

The price of oil was steady this week, the index of commodity prices rose this week by 0.4%, per ounce of gold rose this week by 1.1% the dollar was up 0.9% against a basket of currencies.

Political

Growing tension between Iran and the United States. Iran “clarifies” the US is not afraid a military confrontation between the two sides, as well as North Korea.

The federal appeals court unanimously rejected Trump demands to ban on the entry of Muslims from seven states.

US stocks last week were positive with an increase of 0.8% in the S&P500 and Nasdaq 1.2%. Highs economic data charges and also, the new US administration’s intention to introduce reforms in taxation, investment in infrastructure and ease the financial sector. In Europe, we see an increase in political risks, with the approaching elections in France, the uncertainty in Italy and more. The effect is not reflected on the stock markets, but bond markets also considerably higher yields – in all the major countries increased government bond yields to 10 years, excluding the UK.

Conclusions

Consumer Discretionary (IYC, XLY)- In view of the increase in income disposable light of the planned reform of the individual income tax.

Energy (XLE) – In view of the removal of environmental regulation, and support activities
Locally.

Finance (VFH, XLF, KBE) – In view of the credit growth, net interest income, operating expense structure and quality of credit portfolios that show consistent improvement. Easing regulation of the financial system, improving consumer sentiment, expected reduction of corporate and income taxes, disposable income and the improvement in revenue funding as a result of the increase in interest rates, supports in investment in the financial sector to the near future.

Technology (QQQ, IGV, FDN) – In light of conflicting effects on the bottom line of corporate tax reduction, on the one hand, and increasing regulatory supervision of the sector, on the other.

MSCI Europe / S & P Europe 350 (hedged) – In view of the positive effect of the expansionary monetary policy of the ECB on the profits of multinational companies (HEDJ).

Germany (hedged) – In view of the increase in revenues of export-oriented light of the weakness of the euro against the dollar (DXGE).

UK (hedged) – In view of the interest rate cut and positive growth and postponement of exit from the block will benefit private spending of leisure (DXPS).

Nikkei2225 (hedged) – In view of the monetary and fiscal expansion parallel to support the weak currency profits of exporters (DXJ).


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