US equities are unlikely to perform better
during President Trump’s tenure than under many of
his predecessors, analysts fear.
Stocks have soared since
November’s shock election result, with the
so-called "Trump rally" boosting the S&P 500 by 5.8% and
sending the tech-heavy Nasdaq to new highs.
The gains have been spurred on by the
Republican’s promises of lower taxes and less
regulation, which have strengthened the outlook for corporate
earnings across America.
Stats show that the S&P 500 delivered
an annualised return of 13.9% under Barack Obama and 15.2%
under Bill Clinton, ranking their terms fifth and third
respectively in terms of stock market gains.
But with the S&P 500 currently on a
Shiller Price-Earnings ratio of more than 282 it is unlikely
that it will do better under President Trump, according to ETF
"Such a high Shiller ratio is more
commonly associated with negative future returns," said Paul
Jackson, head of research at Source.
"Valuations are an important determinant
of future returns: Reagan and Obama were helped on that front,
as were Harding and Coolidge in 1921.
"President Trump does not have that
luxury. He should not measure himself by what the US stock
market says as I fear the judgement will be harsh no matter
what he does."
Trump’s inauguration as the
45th President of the United States will take place on Friday,
In a note to clients, Mike van Dulken at
Accendo Markets said investors hoping that his speech
comprehensively outlines his policy plans for the next four
years in a "scripted rather than lively off the cuff
"Financial deregulation, infrastructure
spending and tax reforms will be the key policy topics markets
will be hoping receive some dedicated airtime this evening,"
Van Dulken added.
Meanwhile, Bank of America analysts have
noted a reversal of positions this week, which they described
as "partial profit-taking in Trump trades."
Financial stocks have seen their first
outflows in 17 weeks on concerns Trump may not follow through
with sector deregulation while government bonds registered
inflows for the first time in six weeks.
Investors also poured $1.3bn into precious
metal inflows this week, the highest level in five months.