The first days of Donald Trump at the head of the largest economy on the planet have done well for the country’s stock market. Investors have celebrated the start of the new president with purchases, which have led the S&P 500 to appreciate more than 2% in the last five days. It is the best balance for a first presidential week since Ronald Reagan began his second term in 1985.. Although the presidential speech of both candidates has come at a very different time for the markets, with Reagan inheriting one of the cheapest markets in history, and Trump one of the most expensive, both achieved a first trading week of increases. The new Republican president has achieved this with a softer message than he promised in the election campaign on the tariff front, lowering his tone towards China, an initial stance that investors liked.
The market’s first test with the legislature that has just begun in the United States has been positive. Investors liked Donald Trump’s initial message. The new president has combined a softer message on the tariff front, especially against China, lowering its threats, with a speech that maintains his project of tax cuts and policies to try to boost growth in the country, while at the same time putting pressure the Organization of the Petroleum Exporting Countries to lower artificially inflated crude oil prices and calls for interest rates to be lowered around the world as soon as the price of a barrel begins to fall.
This message has convinced the markets, and Wall Street has noticed it in its prices. So much so that The first week with Trump at the head of the country ends with gains of around 2% for the S&P 500the best balance in a presidential start that has been seen since 1985, when Ronald Reagan’s second term began.
Trump has achieved this milestone, even though the US stock market is now trading at high multiples. And not only that: the new American president has inherited the most expensive bag in living memory. According to the data published by Robert Shiller, using the PER ratio that was baptized with his own name (the Shiller PER, which reflects the market price against the average profits of the index in the last 10 years, and adjusted for inflation) , Trump has inherited an S&P 500 at 37 times its profit, the most expensive in history, compared to Regan, who began his term with the index at 9 times according to this same metric, the cheapest moment in a presidential start that is remembered.
From Pimco, Tiffany Wilding, the manager’s economist, and Andrew Balls, global fixed income CIO, consider that “although the range of possible outcomes has expanded in both directions – from the brightest positive aspects to the darkest negative ones -, US risk assets are increasingly based on optimistic scenarios. Driven by expectations of lower taxes and easing of regulations, US stocks have reached new highs, while credit spreads are approaching historic lows,” they note.
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