US equities on a high - ANZ

Research Team at ANZ, notes that while early-session gains were pared, both the Dow Jones Industrial average and the S&P 500 closed at all-time highs.

Key Quotes

“US equity market strength is surely one of the more surprising elements in this post-US election world. Trump’s proposal of infrastructure spending, tax cuts, and reduced regulation could very well be positive for corporate earnings and growth. And even though bond markets are viewing these policies as inflationary, history has shown that subsequent tighter US monetary policy does not necessarily spell the end of positive equity gains. It is typically not until the central bank is actively trying to cool the economy and tame inflation that monetary policy has been the death knell of equities.”

“However, is history really relevant this time? Recall it was not that long ago that equity markets were being buoyed by the ongoing promise of cheap money and easy monetary policy. Liquidity was dominating growth considerations. One has to wonder that if some of Trump’s proposals fail to get off the ground and bond markets therefore start to reverse some of their moves, by earlier logic, will equities continue to record gains?”