Equity markets are fatigued and lumbering along with little volatility in anticipation of the US election, and is surprising some experts, according to boutique investment manager, Instreet.
Instreet managing director, George Lucas, said this was completely contrary to what he expected for 2016, especially given how markets opened for the year.
“The ASX200 closed at 5430 on Friday last week, pretty much the same level it was three years ago. While we haven’t been rewarded through capital appreciation, we have at least had dividends that are generally higher than the rest of the world,” Lucas said.
Markets were anticipating Hillary Clinton to win, and while markets also expected the Democrats would win the Senate, it anticipated Republicans would win the house, Lucas said.
“If Trump fails to get 40 per cent of the population votes, and let’s face it, he’s not doing his party any favours, the House may also go the Democrats. Currently the polls show Trump with 45 per cent of the popular vote,” he said.
Lucas said this would make it easier for Clinton to get policy approval, but the market would not be happy with this outcome. Healthcare stocks would also take a hit as the Democratic Party planned to mend Obamacare.
Economic outlooks and policies between the US and Europe pushed the US dollar higher, while the Euro hit a seven-month low, Lucas said.
Expectations were also growing that inflation would rise in the US and traders were increasing their exposure to rising inflation, particularly as the price of gasoline and oil were continuing to rally.
In Australia, consumer price index (CPI) inflation data due out on Wednesday was likely to show a rise, and if it did rise, the Reserve Bank of Australia (RBA) would likely cut rates in November, Lucas said.
