Where now for US equities?

Growing political risk

clock • 2 min read

The strength and persistence of the reflationary rally in US equities has been unusual. This rally is the longest in US equities without a 5% correction for over 12 years.

Extended positioning and sentiment measures suggest a pull-back is overdue and mean the market is likely to be very sensitive to even modestly disappointing news.  Trump's election was a key factor in sustaining the momentum in the second half of 2016, but short-term political risks are clearly growing.  Contradictory messaging from the governing team, a continued lack of policy detail in key areas such as tax and infrastructure stimulus, and threats to trade are significant issues at a time when markets are at risk of overreacting to negative news flow. Despite this backdrop, we b...

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