A year after Trump's victory, how have markets fared?

Almost one year ago, the US electorate shocked most pundits and commentators aro

One year ago, the US electorate shocked most pundits and commentators around the world by electing Donald Trump to the White House.

While the Trump administration has been wracked by political scandal ever since January’s inauguration, for the most part, all has been quiet on the economic front. Wage growth has continued to edge up while job creation has continued apace. At the same time, US markets have continued to rally.

Since Trump’s election, the S&P 500 has risen by more than 20 per cent and the Dow by 30 per cent. Just a few days after Trump assumed power in January, the Dow reached a new symbolic high of 20,000 (it has since gone above 22,000).

Trump has been quick to take credit for this rally (and claim it a sign of his own good economic management). ‘The reason our stock market is so successful is because of me,’ he recently told reporters. ‘I’ve always been great with money, I’ve always been great with jobs, that’s what I do.’

Rhetoric aside, there is some truth to the idea that Trump has helped the stock market’s continued climb. Following his election, many commentators accepted that Trump’s promised tax reform and fiscal boost from a new infrastructure plans had made investors optimistic, pushing up equity prices.

However, Trump’s legislative agenda, for now at least, has largely stalled while markets have continued to rise, suggesting there is more to the bull market than just hope for corporate tax cuts and increased fiscal spending.

The stock market’s strong performance is part of a broader trend. Markets started to head upward after bottoming out during the 2007-2009 financial crisis and have not stopped. Since then, the Dow has reached a new ‘record high’ 154 times. The US has also seen a broader economic recovery, stretching back beyond Trump assumed office, with the US’s longer ever recovery in job growth starting under the Obama administration.

Optimism is also not just confined to the US. This year has also seen a general upswing in the global economy. Consensus forecasts for global GDP growth have been revised upwards multiple in 2017. According to Fulcrum Asset Management’s monthly report card, global growth is expected to be 3.8 per cent in total in 2017, with Q4 for the year hitting 4.5 per cent.

Better global economic prospects have propelled other financial markets, often providing better returns than the US market. According to Fidelity International, over the past 12 months, a £10,000 investment in US equities would return you 15.04 per cent.

Best and worst performing asset classes over the past twelve months

Asset Class

% Return

Return on £10,000

European ex UK Equities

22.63

£12,262.77

Asia Pacific Equities

20.36

£12,036.19

Emerging Market Equities

19.79

£11,978.72

Global Equities

16.03

£11,602.93

UK Equities

15.46

£11,545.92

US Equities

15.04

£11,503.54

Japanese Equities

12.35

£11,235.10

High Yield Bonds

3.14

£10,314.16

Real Estate

1.67

£10,166.97

Cash

0.32

£10,032.47

Emerging Market Debt

-0.83

£9,916.72

Corporate Bonds

-2.15

£9,785.20

Commodities

-3.25

£9,674.67

Inflation-Linked Bonds

-4.02

£9,597.52

Government Bonds

-7.84

£9,215.76
Source: Fidelity International sourced from Datastream,
November 2017. % Total returns in GBP 07/11/2016 to 31/10/2017

By contrast, European excluding UK Equities would have provided you with a 22.63 per cent and Asia Pacific Equities 20.36 per cent. However, US equities still performed stronger than Japanese, which saw a return of 12.35 per cent over the same period.

However, while the past year’s strong economic and market performance is part of a broader trend, both domestic and global, the trend has continued and doomsday predictions about Trump before his election have not come to head.

How long the US surge in equity prices lasts is anyone’s guess. While some say it’s prudent to protect against the inevitable market correction, others warn about losing out on the climb up. For those who believe between now and next election (and perhaps even after), Trump will finally start to put his legislative agenda into practice, they can gain exposure through two ETFs: Point Bridge Gop Stock Tracker ETF (ticker: MAGA) or the EventShares Republican Policies Fund (ticker: GOP). Both funds take long positions in companies that are set to benefit from Republican Party policies.  


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