For the past year, Deutsche Bank was one of the most stubbornly pessimistic banks. Then, overnight, everything changed for one reason: Donald Trump.
The German bank laid out its 180-degree change in opinion in a 30-page Friday note titled “Trump: the huge picture for stocks”, in which it revealed that it now expects the S&P to easily rise to 2,250 by Trump’s inauguration, and then rise to 2,500 by 2018 “before suffering its next bear market.”
While not necessarily the “huge picture”, here is the big picture summary of DB’s note:
In the first week of President elect Trump, most of our investor conversations centered on their concerns about a higher fiscal deficit lifting Treasury yields and pressuring PEs and a stronger dollar/ weak oil prices pressuring the EPS outlook and the possibility of protectionism. While we don’t ignore such risks, we think the market is under appreciating the likely big boost to S&P EPS from a lower corporate tax rate and the boost to Bank profits from rising yields (and lower pension expense) and the much higher chance now of a long lasting economic expansion that rivals the 10 year US record. We’re more confident now that the S&P will reach 2500 in 2018 before suffering its next bear market.
The U.S. stock market finished lower Friday but higher for the week as Wall Street heads into a holiday-shortened week when the focus will be on a slew of economic data and fresh scrutiny of a suddenly surging U.S. dollar and rising interest rates.
The past week on Wall Street centered on competing forces as the domestically focused small-company Russell 2000 stock index continued its hot streak, hitting another record high Friday and extending its winning streak to 11 sessions. Similarly, the tech-heavy Nasdaq notched an intraday record Friday.
Still, fresh headwinds emerged in the form of an appreciating U.S. currency and a sell-off in the U.S. government bond market that sent the 10-year Treasury note yield, which moves in the opposite direction of price, soaring to its highest intraday level (2.351% at its high point Friday) since Dec. 4, 2015, according to Tradeweb.
Stocks finished the week mixed. The Nasdaq closed down 12.46 points, or 0.2%, to 5321.51, after setting an all-time intraday high of 5346.80. The Standard & Poor’s 500 fell 5.22 points, 0.2%, to 2181.90, but remained within striking distance of its record closing high of 2190.15 set Aug. 15. The Dow Jones industrial average, which set a record high this week, closed down 35.89 points, or 0.2%, to 18,868. All the major stock indexes posted gains for the week.
Stocks rose Thursday as Federal Reserve Chair Janet Yellen emphasized that the Fed is likely to raise interest rates ‘relatively soon’, which sent bond yields higher and gave banks a boost.
The Standard & Poor’s 500 index gained 10.18 points, or 0.4%, to close at 2187.12, just 3 points short of its record closing high of 2190.15 set August 15. The Nasdaq composite index jumped 39.39, or 0.7%, to 5333.97, slightly short of its all-time closing high of 5339.52 set September. 22. The Dow Jones industrial average, which hit record highs last week, gained 35.68 points, or 0.2%, to close at 18,903.82. .
Federal Reserve Chair Janet Yellen said again that the Fed is more likely to raise interest rates soon. She testified before Congress, and in prepared remarks, Yellen sketched a picture of an improving U.S. economy. The Fed is widely expected to raise rates when it meets in mid-December. She added that if the Fed keeps waiting now and later raises rates too quickly, that increases the risk of a recession.
Bond prices slipped. The yield on the 10-year U.S. Treasury note jumped to 2.28% from 2.22%. Bond yields rise when investors expect higher interest rates.
Though the election of Donald Trump as the next U.S. president has complicated the U.S. economic outlook, financial markets still think that a Fed rate hike next month is far more likely than not. What’s more interesting to markets is when the ensuing rate hike will be and it’s here that Trump’s victory could impact. Trump has promised to cut taxes and raise infrastructure spending, measures that could boost economic growth and potentially spur inflation. That’s seen a rally in stocks, a sell-off of U.S. bond yields and a concurrent rise in the dollar.
Stocks closed mixed Wednesday as the Dow broke a seven-day winning streak and a rebound in oil prices stalled.
The Dow Jones industrial average fell 54.92, or 0.3%, to 18,868.14 after closing at a record high for the past 4 sessions. The Standard & Poor’s 500index dropped 0.2% to 2176.94. But technology companies advanced as they continued a rally from a day earlier and the Nasdaq composite index rose 0.4% to 5294.58.
In the week since Donald Trump’s victory, stock markets have rallied as investors hoped his presidency would augur in a period of more government spending on such things as infrastructure. However, there’s a growing sense that Trump’s policies may lead to higher inflation and interest rates. That’s been particularly notable in the bond markets, where yields have gone up, a development that’s seen the dollar in the ascendant.
The yield on the 10-year Treasury note was unchanged at 2.22%.
Stocks ended higher Tuesday as energy stocks jumped on a sharp rise in oil prices and as big technology stocks, which have been mostly left out of a post-election rally, turned sharply higher.
The Dow set another closing high, building on its record close of Monday, notching seven straight days of gains.
The big gainer was the Nasdaq composite, up 1.1%, while the S&P 500 climbed 0.8% and the Dow Jones industrial average finished 0.3% higher.
Benchmark U.S. crude gained $1.95, or 4.5%, to $45.27 a barrel in electronic trading on the New York Mercantile Exchange.
Bond yields pulled back slightly after a week of sharp increases. The yield on the 10-year Treasury note fell to 2.23% from 2.26% Monday.
The focus in markets in the past few sessions has been on the upcoming Donald Trump presidency, which will begin on Jan. 20. Analysts say his promises of tax cuts and higher infrastructure spending could boost economic growth but also spur inflation. That’s seen a rally in stocks, a sell-off of U.S. bond yields and a concurrent rise in the dollar.
Stocks closed mixed Monday as the Dow posted a sixth straight day of gains and rose to another record closing high but broader indexes struggled.
Donald Trump’s victory over Hillary Clinton last week set off a rally on Wall Street, as jitters gave way to hopes and investors began betting that Trump and a Republican-controlled Congress will boost infrastructure spending, cut taxes and relax regulations that affect energy, finance and other businesses.
But stocks were uneven on Monday as the broader market stalled and tech stock took a hit. The Dow Jones industrial average rose 21.03 points, or 0.1%, to an all-time closing high of 18,868.69. The Standard & Poor’s 500 index dipped 0.25, or less than 0.1%, to 2164.20 and the Nasdaq composite index dropped 18.72, or 0.4%, to 5218.40.
Bond prices continued to fall as investors anticipated that the spending plans of president-elect Donald Trump could also lead to higher inflation. That sent yields sharply higher as the 10-year Treasury bond yield climbed to 2.22% Monday and jumped as high as 2.31%. That is up from 1.78% a week ago. The rise in U.S. bond yields has helped support the dollar as traders price in the prospect of bigger returns on their holdings.
Technology companies like Apple and Microsoft were taking big losses on fears about their overseas revenue and that was canceling out gains for banks, which are trading higher on rising bond yields.
Stocks capped off a strong week of gains with the Dow closing at a another new record high as investors’ fears about Donald Trump’s upset election win gave way to hopes the president-elect’s policies could boost the economy.
Bullishness about how expected increased government deficit spending could help boost economic growth pushed the Dow Jones industrial average up nearly 1,000 points to a record 18,848 during the week. That 5.4% one-week gain, was the best since a 7% weekly gain in November 2011. The broader Standard & Poor’s 500 gained 3.8% during the week, the best weekly showing since rising 4.1% during a week in October 2014. Tech stocks were relative laggards, as the tech-heavy Nasdaq 100 was 1.9% higher on the week, but fell 1.1% since the election.
Stocks rose for five straight days in a volatile week that saw investors initially boost stocks on the conventional wisdom that Democratic presidential nominee Hillary Clinton would win the election. But as election results came in on Tuesday and it became clear Republican nominee Donald Trump was winning, stocks plunged overnight with Dow futures tumbling almost 800 points, on fears of what an unknown Trump presidency would bring.
But investors quickly shook off fears about a Trump presidency and focused on some of the policy changes that might be beneficial to financial markets, including tax cuts, a reduction on regulation and increase in infrastructure spending. The Dow ended up posting two straight days of 200-plus gains and smashed through its previous record close. Friday, the Dow Jones industrial average rose 39.78 points, or 0.2%, to close at record 18,847.66. The Nasdaq composite index gained 28.32 points, or 0.5% to 5237.11. The Standard & Poor’s 500 index dipped slightly Friday as it fell 3.03 points, or 0.1%, to close at 2164.45.
The Dow surged 218 points and blasted to a new closing high, marking Day 2 of the “Trump Bounce” as Wall Street fears related to Donald Trump’sstunning election win gave way to hopes that the president-elect’s policies could boost the economy.
But the Trump rally was not broad-based, as sectors that the candidate unleashed attacks on — technology companies, Obamacare, emerging markets, took a hit.
The Dow Jones industrial average climbed 1.2% to its new all-time closing high of 18,807.88, setting a new intraday high of 18,873.66 in the process. Its previous record close was 18,636.05, notched in mid-August. The Dow jumped 256.95 points Wednesday to 18,589.69.
The broad Standard & Poor’s 500 stock index inched up 0.2% as it moved closer to its record close of 2190.15. But tech stocks tumbled as the Nasdaq composite slid 0.8%.
The post-election rally has been driven by investors reassessing their views on a Trump presidency and beginning to focus on the growth-friendly positives for the economy, such as fiscal spending, lower taxes and less regulation of businesses under Trump.
U.S. stocks held up remarkably well and jumped Wednesday as the major indexes pared steep losses after markets careened out of control in volatile trading overnight after a speech by U.S. President Elect Donald Trump helped reassure investors after his upset win vs. Hillary Clintoncaught investors around the globe by surprise.
The Dow Jones industrial average ended up 257 points, or 1.4%, after tumbling as much as 800 points in late-night futures trading. The blue chips are now 46 points and a fraction from an all-time record closing high.
The broad Standard & Poor’s 500 stock index, which was down 5% overnight and hit a trading halt designed to limit losses, erased its steep declines and climbed 1.1%. The Nasdaq composite also gained 1.2%.
Theories on why the initial market backlash to Trump’s shocking win has given way to stock market gains are starting to roll out. U.K. firm Capital Economics cited a few key reasons:
• The market reaction from Brexit in June, a sharp drop followed by a rebound set a precedent.
• Trump’s “gracious” acceptance speech “encouraged hopes that he will moderate his more extreme positions.”
• Despite a GOP sweep of the White House and Congress, checks and balances remain due to Trump’s differences with “fiscally conservative” Republicans.
• The economic backdrop is “generally improving” and supportive of assets.
Coming off its biggest stock market rally in eight months, Wall Street added to the gains on Election Day as Americans hit voting booths and investors wait to see who will be the next president of the United States.
At the 4 p.m. ET close, the Nasdaq stood 0.5% higher on the day. The Dow closed up 73 points, a 0.4% climb. The S&P 500 also gained 0.4%.
Tuesday marked the Dow’s best two-day gain since a 520-point jump on June 28-29. The S&P 500’s two-day gain of 2.6% wipes out much of the 3.1% drop registered by its previous, nine-session losing streak.
Investors began the trading day cautiously but stocks pushed ahead at midday and jumped higher, a day after the Dow Jones industrial average closed up 371 points and the broad stock market snapped its longest losing streak in 36 years after FBI director James Comey said the agency is not recommending criminal charges against Democratic nominee Hillary Clinton over her emails. Investors interpreted the FBI decision as boosting Clinton’s chance to win the tight election race with Republican challenger Donald Trump as well as clearing a legal hurdle for Clinton in the event that she does prevail on Election Day.