background image

Does Trump's hubris mark the turning point?

Equities 5 minutes to read
Picture of Peter Garnry
Peter Garnry

Chief Investment Strategist

Summary:  The US President yesterday took credit for the 50% stock market rally in the NASDAQ Composite Index since his election. This is a stunning act of hubris given that almost everything is out of his hands and that it is squarely the Fed’s U-turn on January 4 that has sparked the current sentiment rally.


Key equity indices are rolling over today and the price action of German and South Korean equities confirms for the second straight day that the price rises in China should heavily be discounted as a credible signal that things are turning around for the better. Timely indicators such as the Chemical Activity Barometer showed an unabated slowdown in January underscoring that this recent rally is all based on hope and not underlying macro fundamentals. We remain cautious here and recommend investors to reduce equity exposure and take their gains from early January. The risk-reward ratio is not in favour of taking risk at these levels.

S&P 500 continuous future (five year weekly prices):

chart
Source: Saxo Bank
BASF tries its best to bolster confidence

The Q4 result was better than expected on operating income while revenue at €15.6bn also surprised against estimates of €14.6bn. As a result investors are responding positively this morning. However, the key takeaway is a muted outlook with slight sales growth expected in FY19 from higher sales volumes and portfolio effects. In addition the company guides ROCE (return on capital employed) slightly higher than cost of capital. Being generally critical of management expectations our take on the outlook is that the company sees a lot of uncertainty and there is risk to the downside to this revenue growth expectations. The historical evidence shows that companies are often very bad forecasters in the late stage of the business cycle, so at this point investors should discount companies current outlooks.

Housing market outlook in HK and China 

Tomorrow one of the largest residential property developers, Sun Hung Kai Properties, is reporting 1H results with analysts expecting EPS to decline 16% y/y and revenue declining 13% y/y. This should not be a surprise given the housing weakness in China and Hong Kong. But more importantly the outlook and any clues about the sentiment and especially credit conditions among buyers is very important to watch.

Quarterly Outlook

01 /

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

Content disclaimer

None of the information provided on this website constitutes an offer, solicitation, or endorsement to buy or sell any financial instrument, nor is it financial, investment, or trading advice. Saxo Bank A/S and its entities within the Saxo Bank Group provide execution-only services, with all trades and investments based on self-directed decisions. Analysis, research, and educational content is for informational purposes only and should not be considered advice nor a recommendation.

Saxo’s content may reflect the personal views of the author, which are subject to change without notice. Mentions of specific financial products are for illustrative purposes only and may serve to clarify financial literacy topics. Content classified as investment research is marketing material and does not meet legal requirements for independent research.

Before making any investment decisions, you should assess your own financial situation, needs, and objectives, and consider seeking independent professional advice. Saxo does not guarantee the accuracy or completeness of any information provided and assumes no liability for any errors, omissions, losses, or damages resulting from the use of this information.

Please refer to our full disclaimer and notification on non-independent investment research for more details.

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

Contact Saxo

Select region

International
International

All trading and investing comes with risk, including but not limited to the potential to lose your entire invested amount.

Information on our international website (as selected from the globe drop-down) can be accessed worldwide and relates to Saxo Bank A/S as the parent company of the Saxo Bank Group. Any mention of the Saxo Bank Group refers to the overall organisation, including subsidiaries and branches under Saxo Bank A/S. Client agreements are made with the relevant Saxo entity based on your country of residence and are governed by the applicable laws of that entity's jurisdiction.

Apple and the Apple logo are trademarks of Apple Inc., registered in the US and other countries. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.