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Yahoo
02-07-2025
- Business
- Yahoo
Wall Street has faith in Trump. It could all end in tears
All is forgiven. Wall Street has soared to record highs just months after Donald Trump unleashed tariff chaos on the world. The S&P 500 stock index has surged nearly 25pc from the nadir it reached in the days after the US president announced his 'liberation day' tariffs on April 2. The benchmark completed its best quarter since December 2023 on Monday as it reached a new high, even as Trump threatens to impose fresh tariffs within weeks. This will please a president who has long viewed the stock market as an unofficial straw poll on his performance. But is such a full-throated endorsement of Trump's economic plans justified? Not everyone is convinced. '[Stocks] are at an all time high and the risks are still there,' points out Luca Paolini, the chief strategist at Pictet Asset Management. 'It is not as bad as it was but it is not as good as it was a year ago. 'Our view is that it's going to get weaker and that's why we don't buy into the strength of the market.' Stocks have surged even as official data, published last week, confirmed that the US economy shrank by half a percentage point at the start of the year. 'The US economy is somewhat slowing and when you have those types of stock valuations, there's not much room for deception,' says Kevin Thozet, a member of the investment committee at European asset manager Carmignac. Stock prices on the S&P 500 are trading at about 22 times earnings, which assumes that companies will experience astonishing growth in profits in coming years. 'This recovery is driven entirely by soaring valuations rather than earnings upgrades, signalling underlying fragility,' Susana Cruz and Joachim Klement, analysts at stockbroker Panmure Liberum, have warned. The current stock market rally is 'built on shaky ground, given the deep economic uncertainty'. There are some good reasons for stocks to have roared back since Trump announced his 'liberation day' tariffs. 'Markets are always navigating a very uncertain environment. The question is, 'Is it worse or better than a few months ago?' And I think the market, correctly so, came to the conclusion that it's probably better,' says Paolini. 'The trade war that was supposed to be terrible for the global economy. It doesn't look like it is going to be that bad because there are going to be deals between the US-UK, US-India, Vietnam, probably Europe and Japan. 'So yes, there will be higher tariffs, but we are probably going to avoid a devastating trade war of everyone against everyone else.' Rory McPherson, the chief investment officer at Wren Sterling, says: 'Corporate earnings have been really strong. The earnings for the rest of the year have not been downgraded by anything like what they were downgraded in previous crises. 'Yes, they have been downgraded and the downgrade for the year is almost 4pc but that's not too far out of whack.' However, Paolini warns that the surge in stocks means there is 'very limited upside from here because equities are very, very expensive'. The big question hanging over the stock market is the future of so-called US exceptionalism – the previously self-reinforcing theory that America is unique and distinct from other nations. This belief has long helped to prop up stock markets, with investors betting that American businesses will pull through even the most difficult patches. But there are signs that this faith is being shaken. The dollar has suffered its worst first half of the year since 1973 and concerns about Trump's plans to borrow hundreds of billions have seen borrowing costs jump, prompting jokes that the president could become 'Donald Truss'. 'If I'm looking further out I think Trump's policies would lead to a lower US dollar and higher interest rates,' says Thozet of Carmignac. 'The Trump administration wants to have more manufacturing, more stuff made in the US and this comes with a lower dollar policy. And there's a risk that these higher interest rates deflates the elevated prices on US equities.' The man who could make or break the Wall Street rally is Jerome Powell, the chairman of the Federal Reserve. Lower interest rates would spur economic activity and help boost corporate profits. Traders are currently pricing in two cuts before the end of 2025 and a 53pc chance of a third, anticipating that policymakers will react to a slowdown in the American jobs market, which added 139,000 jobs in May, down from 147,000 in April. However, Powell warned on Tuesday at the ECB Forum in Sintra that policymakers had kept rates 'on hold when we saw the size of the tariffs'. He also warned that the 'US federal fiscal path is not a sustainable one' as the Senate edged closer to approving Mr Trump's 'One Big Beautiful Bill', which would cut taxes and add an estimated $3.3 trillion (£2.4 trillion) to the American government deficit over the next 10 years. Those comments will infuriate Mr Trump, who has repeatedly pressured 'Too Late' Powell to cut rates. As the melodrama plays out, Wall Street waits. 'It is not blind hope,' insists McPherson. 'The US has a lot more upside from here.' Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
Telegraph
02-07-2025
- Business
- Telegraph
Wall Street has faith in Trump. It could all end in tears
All is forgiven. Wall Street has soared to record highs just months after Donald Trump unleashed tariff chaos on the world. The S&P 500 stock index has surged nearly 25pc from the nadir it reached in the days after the US president announced his ' liberation day ' tariffs on April 2. The benchmark completed its best quarter since December 2023 on Monday as it reached a new high, even as Trump threatens to impose fresh tariffs within weeks. This will please a president who has long viewed the stock market as an unofficial straw poll on his performance. But is such a full-throated endorsement of Trump's economic plans justified? Not everyone is convinced. '[Stocks] are at an all time high and the risks are still there,' points out Luca Paolini, the chief strategist at Pictet Asset Management. 'It is not as bad as it was but it is not as good as it was a year ago. 'Our view is that it's going to get weaker and that's why we don't buy into the strength of the market.' Stocks have surged even as official data, published last week, confirmed that the US economy shrank by half a percentage point at the start of the year. 'The US economy is somewhat slowing and when you have those types of stock valuations, there's not much room for deception,' says Kevin Thozet, a member of the investment committee at European asset manager Carmignac. Stock prices on the S&P 500 are trading at about 22 times earnings, which assumes that companies will experience astonishing growth in profits in coming years. 'This recovery is driven entirely by soaring valuations rather than earnings upgrades, signalling underlying fragility,' Susana Cruz and Joachim Klement, analysts at stockbroker Panmure Liberum, have warned. The current stock market rally is 'built on shaky ground, given the deep economic uncertainty'. There are some good reasons for stocks to have roared back since Trump announced his 'liberation day' tariffs. 'Markets are always navigating a very uncertain environment. The question is, 'Is it worse or better than a few months ago?' And I think the market, correctly so, came to the conclusion that it's probably better,' says Paolini. 'The trade war that was supposed to be terrible for the global economy. It doesn't look like it is going to be that bad because there are going to be deals between the US-UK, US-India, Vietnam, probably Europe and Japan. 'So yes, there will be higher tariffs, but we are probably going to avoid a devastating trade war of everyone against everyone else.' Rory McPherson, the chief investment officer at Wren Sterling, says: 'Corporate earnings have been really strong. The earnings for the rest of the year have not been downgraded by anything like what they were downgraded in previous crises. 'Yes, they have been downgraded and the downgrade for the year is almost 4pc but that's not too far out of whack.' However, Paolini warns that the surge in stocks means there is 'very limited upside from here because equities are very, very expensive'. The big question hanging over the stock market is the future of so-called US exceptionalism – the previously self-reinforcing theory that America is unique and distinct from other nations. This belief has long helped to prop up stock markets, with investors betting that American businesses will pull through even the most difficult patches. But there are signs that this faith is being shaken. The dollar has suffered its worst first half of the year since 1973 and concerns about Trump's plans to borrow hundreds of billions have seen borrowing costs jump, prompting jokes that the president could become 'Donald Truss'. 'If I'm looking further out I think Trump's policies would lead to a lower US dollar and higher interest rates,' says Thozet of Carmignac. 'The Trump administration wants to have more manufacturing, more stuff made in the US and this comes with a lower dollar policy. And there's a risk that these higher interest rates deflates the elevated prices on US equities.' The man who could make or break the Wall Street rally is Jerome Powell, the chairman of the Federal Reserve. Lower interest rates would spur economic activity and help boost corporate profits. Traders are currently pricing in two cuts before the end of 2025 and a 53pc chance of a third, anticipating that policymakers will react to a slowdown in the American jobs market, which added 139,000 jobs in May, down from 147,000 in April. However, Powell warned on Tuesday at the ECB Forum in Sintra that policymakers had kept rates 'on hold when we saw the size of the tariffs'. He also warned that the 'US federal fiscal path is not a sustainable one' as the Senate edged closer to approving Mr Trump's ' One Big Beautiful Bill ', which would cut taxes and add an estimated $3.3 trillion (£2.4 trillion) to the American government deficit over the next 10 years. Those comments will infuriate Mr Trump, who has repeatedly pressured 'Too Late' Powell to cut rates. As the melodrama plays out, Wall Street waits. 'It is not blind hope,' insists McPherson. 'The US has a lot more upside from here.'
Japan Times
26-06-2025
- Business
- Japan Times
Foreign buying of Japanese stocks marks 12-week streak, TSE data shows
Foreign investors were net buyers of Japanese stocks for the 12th consecutive week, according to data released Thursday from Tokyo Stock Exchange operator the Japan Exchange Group. But their net buying fell to the lowest in the past 12 weeks while separate data, released earlier in the day from the Finance Ministry, showed foreign investors became net sellers for the first time since March, suggesting their appetite may be waning. The Finance Ministry's data is based on reporting from major market players and covers not just stocks but also exchange traded funds and over-the-counter trades. According to the exchange data, foreign investors bought ¥88.4 billion ($614 million) of Japanese equities in the week that ended on June 20. The continued buying has echoes of the April-June quarter in 2023, when Warren Buffett's investment in trading houses and hopes of corporate governance reforms impelled foreign investors to pile into Japanese stocks. The size of their buying was smaller this time. During the second quarter of 2023, foreign investors bought ¥6.1 trillion, dwarfing the net total buying since April of ¥4.1 trillion. The latest inflows may have been driven by global investors who are rotating out of U.S. stocks that have become expensive, experts say. "It's not like Japanese earnings were strong or investors were getting (more) positive about Japan,' said Hiroshi Matsumoto, senior client portfolio manager at Pictet Asset Management Japan. "The market has risen even as the earnings aren't that strong. So the market's valuation has become a bit rich,' he said. Data from the Finance Ministry shows foreign investors sold a net ¥524.3 billion of shares in the period that ended on June 20.
Japan Times
26-06-2025
- Business
- Japan Times
Foreign investors sold Japan stocks for first time in 12 weeks
Foreign investors were net sellers of Japanese stocks last week for the first time since March, according to data from the Finance Ministry. They sold a net ¥524.3 billion ($3.62 billion) of the shares in the period ended June 20, the data showed Thursday. In the 11 weeks prior to that, the investors bought ¥7.236 trillion of Japanese stocks in total despite concerns about U.S. tariffs. "The market has risen even as the earnings aren't that strong. So the market's valuation has become a bit rich,' said Hiroshi Matsumoto, senior client portfolio manager at Pictet Asset Management Japan. The ministry's data is based on reporting from major market players and covers not just stocks but also ETFs and over-the-counter (OTC) trades. Separate data from the Tokyo Stock Exchange, which covers just listed stocks, has also shown foreign investors have been buying Japanese stocks for 11 weeks. Many market players suspect the continued inflow likely reflects global investors' rotation out of U.S. stocks.
Yahoo
23-06-2025
- Business
- Yahoo
Investors set to flock to safety as world awaits Iran's response
'The level that stock markets are standing at, they're definitely going to face increased risk, there's no doubt about that' Traders are forecasting a drop in stocks, a jump in crude prices and possibly a strengthening of the dollar as investors head for safety in the wake of the US attack on Iran's three main nuclear sites. Concern that the war will intensify even further is likely to push equity prices lower, while bonds may get a boost, market watchers say. The moves will be bigger if Iran responds with steps such as blocking the Strait of Hormuz, a key passage for oil and gas shipments, or attacking US forces in the region, they say. 'The initial reaction will be a flight to safety and equities will probably be weaker,' said Neil Birrell, chief investment officer at Premier Miton Investors. 'The level that stock markets are standing at, they're definitely going to face increased risk, there's no doubt about that.' Market reaction has been muted since Israel's initial assault this month: Even after falling for the past two weeks, the S&P 500 is only about 3% below its all-time high from February. Investors expect the conflict to be be localized, with no wider impact on the global economy, said Evgenia Molotova, a senior investment manager at Pictet Asset Management. 'But it all depends on how the conflict develops and things seem to be changing by the hour,' she said. 'The only way they take it seriously is if the Strait of Hormuz gets blocked because that will affect oil access.' Iran has vowed to impose 'everlasting consequences' for the bombing and said it reserves all options to defend its sovereignty. Still, downside is likely to be limited because some market participants have been preparing for a worsening conflict. The MSCI All Country World Index has pulled back 1.5% since Israel attacked Iran on June 13. Fund managers have reduced their stock holdings, shares are no longer overbought and hedging demand has increased, meaning a deep selloff is less likely at these levels. The biggest market reaction since the start of the escalation has been in oil, with Brent futures jumping 11% to US$77 a barrel. Traders are preparing for another surge in crude prices even as it's unclear where the crisis goes from here. That rise is expected to restart on Monday, after the US assault dramatically raised the stakes in a region that accounts for a third of global oil output. Morgan Stanley's oil analysts said a quick resolution would allow prices to fall back to the US$60s a barrel, but continued tension could leave oil in the current range. 'Fundamental disruptions to the global supply of oil with a possible hit to shipments through the region would push oil prices a lot higher from here,' they said. Meanwhile, the dollar has risen about 0.9% since the conflict started. It's a relatively small move given the US currency's traditional role as a haven in times of turmoil. The US currency has been battered in recent months by Donald Trump's trade and fiscal policies. 'The biggest trade around at the moment is short dollar,' said Birrell. 'No one likes it. But traditionally it's the safe currency people go to, and it might just be that this turns around the fortunes of the dollar.' The reaction was less straightforward in the US$29 trillion market for US Treasuries since the conflict began. Yields initially sank but the moves swiftly reversed over concern about a resurgence in inflation. US Treasuries are, overall, little changed since June 13, with the yield on 10-year notes rising since then by less than two basis points to close Friday at 4.38%. Following are comments from strategists and analysts on how they expect investors to respond on Monday: Emmanuel Cau, head of European equity strategy at Barclays Plc In the very near term, markets may be worried about Iran retaliation, and whether or not it blocks the Strait of Hormuz... Recent crises in the region have shown that the impact on equities from oil shocks tend to be short lived, and usually end up as medium-term buying opportunities. In fact, if the conflict results in bringing more stability and peace to the Middle East, it could be seen as bullish for risk assets over the medium term. Diego Fernandez, chief investment officer at A&G Banco in Madrid 'We expect some risk off, but not an aggressive one. The world may be a safer place without the Iranian nuclear threat, but we still need to see the Iranian reaction and how the conflict evolves.' Anthony Benichou, cross-asset sales at Liquidnet Alpha trading desk Trump couldn't afford for this to drag on. If oil stays elevated too long, especially heading into the midterms, it's a political headache. High gas prices hit Main Street, fuel inflation, and turn voters against you. So the move had to be fast, surgical, and decisive. Note how impressive the risk premium has stayed contained in oil — short-term vols have spiked, but there's been little spillover elsewhere. If Iran were to shut down (the Strait of Hormuz), they'd be cutting off their own main revenue lifeline — effectively speeding up their own collapse. Alfonso Benito, chief investment officer at Dunas Capital It is a very worrisome situation. Investors have some hours to digest the attack before the market opens Monday, and a lot will depend on what Iran does if it responds or not. Anyhow, it's not good. Manish Kabra, head of US equity strategy at Societe Generale SA Equities are likely to only see a shallow drop because central bank policies are much more accommodative than in previous oil shocks. There's also no euphoria in markets in terms of flows. It won't be like we had in 2022 when the S&P 500 and European stocks dropped 20%. Our take is that the Fed may actually ignore any potential oil shocks and that's why I still say there's a good possibility that the S&P 500 will make new highs this year. Anthi Tsouvali, strategist at UBS Global Wealth Management We're definitely in a higher-risk environment than we were on Friday. Markets will react, but probably still modestly in equity markets. We're for sure going to see oil going higher. Investors will also have to think about the impact of higher oil on inflation, and if that's the case, Europe is going to be hit harder than the US. Uncertainty has been very high this year and now this is another event that's added to it. So we'll see some volatility but right now, given the information we have, I don't see that it's going to be long lived. So far, we haven't seen bombings of energy facilities and the Strait of Hormuz hasn't closed. Markets will appreciate that. While there's going to be risk-off sentiment for sure, hopefully it's not going to be long lived or too deep. Aneeka Gupta, head of macroeconomic research at Wisdom Tree UK Up until now, the war was very much focused on the Middle East, but with the US's involvement this looks a lot more serious in nature and the risk is really spreading out in a very big way. In terms of markets, we'll definitely see the biggest impact in commodity markets and energy prices are likely to go even higher. We're also likely to see these tensions reverberate across equities. Markets are going to be pricing in a wide variety of possibilities about how Iran is going to escalate. The worst-case scenario would be Iran trying to close the Strait of Hormuz. The first impact would be seen in oil markets and then quickly resonate across stocks and bonds. From an equity market perspective, this is very much risk off. Charu Chanana, chief investment strategist at Saxo Markets in Singapore This marks a turning point for markets. While oil and gold are likely to surge on geopolitical risk, the bigger question is whether US assets can still command a safe-haven premium. Rising fiscal risks, institutional strain, and policy unpredictability could accelerate the fading of US exceptionalism. Trump's decision to bypass Congress adds to institutional concerns, likely putting upward pressure on US yields and questioning the credibility premium once attached to US assets. Beyond the immediate market reaction — higher oil, gold, and volatility — investors will be watching for a potential shutdown of the Strait of Hormuz or retaliation against US naval assets. These risks could drive oil sharply higher, add inflation uncertainty, and test the US dollar's safe-haven appeal amid rising concerns over fiscal dominance and institutional erosion. Shoki Omori, chief strategist at Mizuho Securities Co Capital will race toward classic refuges — Japan government bonds, the yen, Swiss franc and gold. Treasury yields would feel the downdraft almost immediately. History shows that when investors dump dollars, they often scoop up Treasuries, anticipating that the Federal Reserve will lean dovish to steady the ship. A measured statement could keep the greenback steady, but any rhetoric hinting at strikes on US soil or forces would likely jolt it downward. Dollar-yen could edge down to 144. Nick Twidale, chief analyst at AT Global Markets We're going to see a gap higher in gold, yen, Swiss franc and likely the dollar. Gold may shoot up to $3,400 very quickly but the key theme will be volatility — the moves might not stick if, for example, Trump decides the strikes are done. Trump has the bigger stick compared with Tehran, and as such his next move — be it a further escalation or heading back to the negotiating table — will matter more for markets. Gary Dugan, chief executive officer of The Global CIO Office We expect equities to react in a measured way, be it with some downside risk. Markets are not technically overextended with many trading within 3-5% of their 200-day moving averages. Unless we see a significant spike in oil prices we would expect equity markets to hang in around current levels. Nirgunan Tiruchelvam, an analyst at Aletheia Capital in Singapore There are 3 scenarios. A dramatic escalation in Mideast tension: This could see the Strait of Hormuz being blocked and a cycle of revenge. The second is an end to the hostilities in a similar manner that India-Pakistan ended last month. The third is the continuation of the low-intensity bombing by both sides. We expect risk assets to be under pressure under scenarios 1 and 3. Oil and other commodities will also rally under these scenarios. Jason Schenker, president of Prestige Economics The level of fear in global financial markets will hinge on the next wave of actions in and the potential duration of this conflict, and it may take days or weeks before the fog of war clears enough for traders to take outlier positions with significant conviction. As for bonds, the impacts of this conflict could be mixed. While the Fed would have less leeway to cut interest rates due to higher crude oil prices, money leaving equity markets may flood into bonds and Treasuries as safe havens, sending bond prices higher and bond yields lower. Viraj Patel, strategist at Vanda Research This weekend's US strikes are another reason for hedge funds and CTAs to rush towards the exit on their bearish USD bets. We believe one of the biggest pain trades this summer could be a grind higher in the USD as the reasons for being short USD fall by the wayside. There's a perfect storm brewing for non-US equities — especially crowded cyclical European and Asian markets. Rising geopolitical risks are another headwind for global growth on top of the ongoing slowdown in cross-border trade driven by Trump tariff policies (which certain equity markets seem to be ignoring). We believe Europe and EM could underperform here as recent 'hot money' inflows unwind as global investors turn more cautious. See Also: Click here to stay updated with the Latest Business & Investment News in Singapore US strikes on Iran come at fragile moment for global economy US attacks nuclear sites in Iran, widening Mideast conflict Trump says US successfully attacked three nuclear sites in Iran Read more stories about where the money flows, and analysis of the biggest market stories from Singapore and around the World Get in-depth insights from our expert contributors, and dive into financial and economic trends Follow the market issue situation with our daily updates Or want more Lifestyle and Passion stories? Click hereSign in to access your portfolio
