Hard to bet against: An erratic Trump no dampener | Australian Markets

Whereas Trump’s return to the Oval Workplace has been nothing short of a fever spell, US financial markets stay properly positioned and, furthermore, on monitor to ship robust returns for traders this 12 months, says a main market analyst.

For Chris Iggo, AXA IM chief investment officer (CIO), the US’s macroeconomic backdrop “remains solid”, regardless of the continued risk of trade tariffs and heightened geopolitical tensions.

“The world’s largest economy is growing, US consumers continue to benefit from a healthy jobs market, growing real wages, and a substantial wealth effect,” Chris Iggo, Chief Funding Officer, Core Investments, AXA Funding Managers

“Markets are doing well too. Nothing that the new US president has said or done has caused a bad reaction in financial markets. Quite the contrary, despite the uncertainty, equities are up, and so are bonds.”

As Iggo notes, US equity ETF traders, particularly, have reaped stable good points during the last 12 months, with the S&P 500 index hitting an all-time high on 19 February (reaching 6,144 factors).

“Notably between Joe Biden’s inauguration in 2021 and Trump’s in January, the blue-chip index achieved a total return of 63.3% (13% annualised),” Iggo stated.

Trump, ever the competitor, will “no doubt… be determined to beat that,” he added.

The index, nonetheless, has borne market jitters during the last week, down 4.8% from its highwater mark (hitting 5,850 factors at market close on 3 March) and 0.54% down within the year-to-date.

Trump’s beneficial views on AI and tech, the oil and fuel sector and the deregulation in finance stay “the centre of hope for continued stock market performance”, Iggo stated.

Bond markets, as Iggo famous, are additionally properly positioned for growth, with the last decade of low rates of interest possible “well behind us”.

“Bond market moves are driven by growth, inflation, policy, and geopolitical events. And recent events have hit bond markets as yields have risen on the back of the Federal Reserve’s interest rate easing, with 100 basis points in cuts since September.”

For Iggo, increased yields current compelling alternatives for ETF traders to increase their uptake of bonds this 12 months.

“US Treasuries have always had a role as a core allocation thanks to their stability, liquidity and a diversifier and currently ETF investors should also potentially benefit from long-term yields of between 4% and 5%.”

“This raises the probability of potentially decent returns for ETF investors across the asset class in 2025,” Iggo stated, whereas the three-year default price for high yield bonds is at a three-year low of 1.5%, “[exemplifying] the strong fundamental and technical backdrop of this asset class”.

“For all the market commentary around bond markets, liquidity is good, demand is strong and losing money through default is still a very rare event.”

Simply over a month since Trump took workplace, and regardless of the uncertainty and potential upheaval his future insurance policies could convey, the present energy of the ETF investment surroundings is prone to persist, in line with Iggo.

“[For] ETF investors markets – tech sector lurch aside – have been relatively calm while the outlook for company earnings, markets – and potential investment returns – remain bright.”

“Ultimately, despite the current uncertainties, it remains hard to bet against the US.”