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Friday, 26.04.2024, 14:03
RAM: the market calm gone as Trump's protectionist policies raise uncertainty
“Despite excellent news and favorable investment environment, main stock
indices finished February in red. February drop halted 15-month winning spree
for global stocks. Small correction in February replaced rapid growth of
January – a healthy development that reminded investors about forgotten risks
in the financial markets”, say RAM experts in the review.
By the end of February majority of companies reported quarterly results. The
earning season was exceptionally good - earnings growth rate for the S&P
500 was 14.8% and sales growth rate was 8.2%. Three sectors had double-digit
sales growth rate – IT, energy and materials. These sectors also were top three
by earning growth. Recent years trend on widening of valuation multiplicators
has changed direction in February. This means that relative value of earnings
growth for investors declined due to higher yields on the US government
bonds.
Changes in the market inflation expectations led to higher yields on
Treasuries. Inflation in the U.S., the economy growth pace fastest in more than
two years and strong consumer confidence was reason behind much higher
probability of four FOMC rate moves in 2018.
Slowing euro area inflation eased pressure on Draghi to start exit talks about
extraordinary accommodative policy measures aimed on recovery of inflation and
economy.
However, main reasons to worry were not political events in China, but actions
of the president of the US. Trump announced intentions to sign an order to
impose the tariffs on imports of steel and aluminum. “The move can partly
fulfil his presidential campaign promises for greater protectionism, yet
another forgotten risk after Trump’s election. Moreover, the tariffs would hurt
major US allies – Canada, Mexico, Japan, South Korea and EU the most, and it is
unlikely that China would suffer the consequences. Even more, the decision to
invoke “national security” to impose tariffs could trigger a “domino effect” as
any country may use national security as an excuse for their own trade
measures”, note RAM experts.
The review on RAM and the current comments of the specialists can be
found here.
Rietumu Asset Management (RAM) is part of Rietumu Bank, the leading private
bank in Latvia. The company provides professional asset management services.
RAM’s products and services are intended for a wide range of investors and are
designed to meet the specific demands and needs of each customer. In the
current market conditions, RAM’s specialists offer their customers the ability
to reach an effective yield to risk ratio.