Stock markets falter as investors begin to question Donald Trump’s promises
European stock markets fell yesterday, knocked by Wall Street suffering its worst day of the year on Tuesday, as doubts around Donald Trump’s economic policies drove investors out of some of the most popular trades of the last few months.
The Dow Jones Industrial Average and the S&P 500 both fell more than 1 per cent on Tuesday, which
marked their worst one-day performance since Mr Trump’s election victory in November, according to Reuters. Asian shares posted their biggest single-day decline in two weeks yesterday and major indices across Europe faltered too. London’s FTSE 100 ended the day off 0.7 per cent. The Stoxx Europe 600 index slipped 0.4 per cent. US indexes fell too, but not as dramatically as on Tuesday.
“Traders seem to be reassessing the Trump trade,” said Neil Wilson, an analyst at ETX Capital. “Will he deliver on the promise that has fuelled the gains since November? It does appear that the optimism has gone to some extent,” he added. Strategists at Morgan Stanley agreed that investors are “beginning to doubt the potential pace of US economic fiscal policy reform”.
The fall in equities also coincided with the release of an investor survey by Bank of America Merrill Lynch, which showed that investors now see global stocks as being at their most expensive in 17 years. In the US, bank stocks were particularly hit by selling on Tuesday and the S&P’s sub-sector of financials fell around 2.9 per cent, which was its biggest fall in a single day since June last year.
In the aftermath of Mr Trump’s November election victory, stock markets, especially in the US had surged, spurred by the New York businessman’s campaign promises of tax and regulatory roll backs and higher infrastructure spending. Bank stocks enjoyed especially sharp rises and the dollar rallied hard too, but in the last few weeks moves have become more muted. Investors appear to be looking for proof that the rallies will be justified by hard policy action from the President.