Donald Trump continues to rattle the markets with his tapping out of badly-timed tweets. The most recent of these, about prospects of a lack of agreement with the Chinese regarding talks about customs duties on the 10 May deadline, startled the markets. They triggered a rather welcome correction after the double-digit increase recorded since the beginning of the year. Investors look to the “finger of Donald”, which could be termed the “finger of God” when applied to the almost heavenly or divine performance of the stock market and economy in the US, both of which reached record peaks. And nothing could be more appropriate, when the “finger of God” is also the name of a mountain, or more precisely a summit of the La Meije mountain in France, which rises to a height of 3,973 metres. No previous president has “assuaged” the markets to this extent, with his strategy of winning back global trade and his strong commitment to collecting international capital flows. The result is the astonishing strength of the dollar (1.12 against the euro).
In general, published results continued to deliver a fairly high degree of nice surprises on both sides of the Atlantic. This won’t yet be enough to set any goals as regards full-year results for 2019, as the first quarter has not yet closed. What is more, for the moment investors are more concerned about this “finger of God”, which is again an expression that is rather suited to the American president, as it is also the name given to the tornados that occur in the central zone of the United States, Tornado Valley. It is likely that, at this time of low volumes (and May is usually a low-volume month) and prior to the European elections, few investors will risk investing in risky assets without a definitive agreement on the trade war. This current correction should also provide new points of entry to the market for Mohican investors who bravely continue to believe in Europe. Valuation levels will ease as the macro-economy improves. Europe is still frightening people off, even though dispassionately the majority of investors know that it is not going to fall apart, currently everyone wants to be on the same side as the “hand or finger of God”.
In a bizarre coincidence, it was also on 10 May (although this time in 1508) that Pope Julius II asked Michelangelo to paint the vaulted ceiling of the Sistine Chapel in Rome. This illustrates God’s creation of Adam, the first man, with this famous “finger of God” (their two index fingers are almost touching). Without indulging ourselves too far with this mystical religious symbolism, we could nevertheless be tempted to say that President Trump has also created a type of new “economic being” and given birth to a new way of leading his country, the global economy and the financial markets.
Igor de Maack, Fund manager and spokesperson at DNCA. This article was finalised in May 10th, 2019.
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