Originally published by AxiTrader
Key Takeaway
It's widely accepted that stocks in the US and around the globe are higher as a result of positive expectation around president Trump and his policies - so-called Trumponomics.
Arguably however, it seems the rally has also been a recognition of an underlying shift in the global economy that stock investors had already picked up on in 2016. One that means that Trumponomics is an important incremental addition to global reflation but not essential for it.
Effectively that's what the Fed has been saying recently in their speeches - if not last week's FOMC statement.
It means Trump is important, but not essential, to the global stock market rally.
What You Need To Know
Reflation is a theme I have been writing about for months now.
And while I recognise that stocks rallied in the aftermath of the Trump victory on the more conciliatory approach of the then president-elect I also believe there is strong evidence a large part of this was that investors were already noticing improved economic data and an uptick in inflation.
Indeed last year's rally in the S&P 500, which lead other markets higher, started as the extreme pessimism of early 2016 receded as the data flowing in the G10 started a trend of beating expectations.
It's a trend that picked up in the second half of the year. And, its an improvement in data flow which has continued the past two months, supporting the global stock market rally.
There is but one clear conclusion from this relationship.
Donald trump's policies and platform has been an important driver of overall sentiment in stock and other markets. But the key is that the data made it possible for markets to believe in Trumponomics - not the other way around.
That suggest the stock market rally should continue as long as the data remains strong across the globe.
Naturally at some point expectations will get ahead of reality and we'll see a dip as we did in the second quarter of 2016.
But after so many years of weak growth and deflation, and with signs that global reflation was already occurring the Trumponomics stimulus and the reduction of business regulations is just an added bonus.
It also means the rally is Trumps to end if his presidency goes awry.
Have a great day's trading.