The investment world seems to be collectively listening to ‘Weightless’ by Macaroni Union. The S&P 500 has not had a single day of losing 1% or more since Donald Trump’s election, realised volatility is near long-term lows and global equities are up almost 6% in only the first two months of the year. Not that I’m complaining, but what’s going on?
Leicester city’s rise and fall over the past year mirrors that of financial risk premiums. Fundamentals are probably average but performance can oscillate wildly. The Fed wants to see monetary conditions tighten: this can come through a stronger dollar, higher risk-free rates or increased risk premiums.
A new era has begun; what seemed inconceivable only a year ago has happened: Donald Trump has actually moved into the White House. His first week in office could be telling for the next four (or eight?) years. Disputes around the inauguration turnout aside, will we get a flurry of activity or will it be the start of Trumponomics getting bogged down in Washington bureaucracy? Alongside markets, we will be paying close attention.