As some Trump trades lose steam, what happens next?
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AS SOME TRUMP TRADES LOSE STEAM, WHAT HAPPENS NEXT?
After Trump's election victory earlier this month, some clear themes emerged in markets: the dollar strengthened, U.S. equities powered ahead and U.S. bond yields rose - but some of those moves have struggled to push on.
Investors might now be wondering where do we go from here and what comes next?
"X-asset markets initially reacted positively to the Trump win and ensuing Red Sweep, but after their initial burst of outperformance, some Trump trades have lost steam in the last week or so," Barclays says.
Strategists at the British bank say this is consistent with client conversations, where many were well positioned heading into the election but have since "taken some money off the table".
Capital Economics is not convinced that Trump's victory is a net positive for stocks, believing that his policies - import tariffs and immigration curbs - will be negative for growth.
But, they remain bullish on U.S. equities as they believe the AI hype is fuelling a stock market bubble. The consultancy is therefore sticking with its forecast for the S&P 500 to reach 7,000, implying a 17% rise from current levels.
Barclays also believes the AI theme is still in play, evidenced by Nvidia's results on Wednesday this week.
"After some nerves in recent months around potential for slowing in AI investment, we think this should help reassure on the longevity of the theme," Barclays says.
For now though, investors may have to bide their time.
"Markets have shifted to guessing game mode about how quickly and strongly Trumponomics policies will be implemented," Barclays adds, noting that cabinet appointments are likely to drive volatility until the new administration is in place in late January.
(Samuel Indyk)
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