TRUMP’S TRILLION DOLLAR SHARE RALLY

DONALD Trump sure knows how to send share prices rocketing right around the world – in his latest effort, he’s almost single-handedly added well over a trillion dollars to global share values in a single trading session.

Yesterday, two of the three major Asian markets – Tokyo and Shanghai – both leapt more than 2 per cent. The third, Hong Kong, would have followed but it was closed.

Our own market was up, but by a more sedate 0.4 per cent.

As this was written early yesterday evening Wall St was headed for an all-time record high when it opened for the week near-midnight Aussie time.

And that was on both the iconic Dow Jones index and the broader S&P 500.

And all because President Trump went to Osaka and agreed a truce with China’s president Xi Jinping in their trade war – and then took a detour to the Korean DMZ to, quite literally, ‘step over the line’ with his ‘new best friend’, North Korea’s Kim Jongun.

It was the – to be frank, somewhat less than “peace in our time” – non-deal with China that sent markets rocketing, rather than the “best-buddies catch-up”.

And what was absolutely critical to getting that reaction was the backdrop of near-zero policy short rates and long rates in global capital markets – and even more importantly, the nearguarantee that both sets will stay near zero into the foreseeable future.

world followed, including ours.

Wall St – and us – then kept going.

For Wall St to hit a new all-time high (on the S&P 500, but not the Dow, whose all-time high remained the point reached last October).

We climbed to our highest point since the GFC in 2008, but around 3-4 per cent shy of our all-time high from back in 2007.

Now, depending how it plays out on Wall St coming up overnight Monday – and then over the next few trading days and weeks – our market could well be dragged up to finally reach and then top that 2007 high-point.

The real core driver is sustained near-zero interest rates.

If you can only get 1-2 per cent on government bonds, just about everywhere around the world (apart from crazy places like Venezuela), shares look attractive as the alternative.

This gets an added twist in Australia thanks to franking credits – and that appeal has been given a further boost by the defeat of Labor and its plan to cut back on franking cash refunds.

Although the major driver of even our market is what happens to US rates – both the Fed’s policy rate and the US long bond rate, feeding into Wall St and then Wall St feeding into all world stock markets – rate cuts from our Reserve Banks have and will provide further stimulus.

If the RBA doesn’t cut today it will cut next month.