Investment Clock insights

Trick or Tweet?

Trevor Greetham 

31 October 2019

With Wall Street back at new all-time highs, President Trump is once again tweeting in praise of equity market performance. Ironically, these tweets have tended to come just before market drops, often triggered by Trump himself unexpectedly announcing tariff increases, as in May and August this year, or criticising the US Federal Reserve (Fed) for failing to ease policy sufficiently, as we saw in the last quarter of 2018 (see chart).

Source: RLAM and DataStream as at 31 October 2019 

All-time highs have provided the President with an opportunity to take actions that appeal to his core voters but hurt the market. His negative interventions have also effectively forced the Fed into cutting interest rates further than they might otherwise have done. 

Trump will be disappointed that Fed Chairman Jerome Powell hinted that yesterday’s quarter point interest rate cut was the last for the foreseeable future. Will the President deliver a Halloween shock to the market or will he remain uncharacteristically restrained, taking the view that his interests are better served by helping the stock market and economy to recover as the November 2020 elections come into view?

With monetary policy easing and the US consumer holding up well, we remain moderately overweight equities within our multi asset funds. We would look to add further on a market dip, as we have previously following Trump-fuelled market corrections.

For professional clients only, not suitable for retail investors. Past performance is not a reliable indicator of future results. The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. The views expressed are the author’s own and do not constitute investment advice.