On Jan 20, Donald Trump will be inaugurated as President of the United States. He has also tweeted (his preferred means of official communication) that he will hold a press conference on Jan 11, which will be closely watched for clues as to the resolve behind his campaign manifesto and the future direction of his Presidency.

So far the Trump Trade has driven financial conditions tighter in the immediate term while growth on the back of policy is still just a (Trump) promise.


Global PMIs almost universally either beat expectations or were higher with the exception of India where the impact of a one time and temporary shrinkage of the money supply hurt sentiment and realized output.

Inflation data were also universally higher supporting the growing consensus that the global economy is entering a reflationary period. Some of the pressures are due to a resurgence in commodities from industrial to energy, but some of the pressures are also occurring at core level. The global economy is now looking healthier than ever in the past few years which must raise the question of whether further stimulus whether fiscal or monetary is necessary or not. Some of the exuberance is a consequence of expectations that reflationary policies will continue or indeed accelerate.


Investors are expecting a rather optimistic 11.5% (according to FT) earnings growth for the S&P in 2017 with energy and materials leading the average and real estate and utilities lagging. The coming earnings season will give us some clue as to how realistic are these expectations.

The energy sector is expected to stage a significant earnings recovery of over 300% earnings growth. There are a couple of factors behind this including higher energy prices as well as infrastructure investment and the relaxing of costly eco-friendly policies.


USD duration recovered just as EUR duration sold off. Credit spreads continued to tighten across regions. Our preferred sectors of US mortgages, leveraged loans and bank capital continue to perform as expected and we maintain our overweight position in these areas.


The USD has been one of the strongest consensus trades in recent months but is dollar strength justified and even if it is, has it overshot?


Oil is holding steady and rising after the Nov 30 OPEC production cut. The Brent WTI spread is also rising steadily and may substantial distance to widen. The contango in the oil market has flattened out.

After 6 months of weakness, gold is having a mini rebound. If the inflation expectations surrounding Trumponomics materialize, gold may come to be regarded as an inflation hedge again.

Week ahead:

Jan 8

  • China trade balance

Jan 9

  • China PPI
  • Germany IP
  • Taiwan trade data
  • Eurozone unemployment
  • Fed’s Rosengren, Lockhart, Evans speak
  • China credit data

Jan 10

  • India trade data
  • France IP and mfg data

Jan 11

  • UK trade, IP and mfg data
  • Japan current account

Jan 12

  • Eurozone IP
  • India CPI
  • Fed governers speak

Jan 13

  • US retail sales
  • Fed Chair Yellen speaks
  • US PPI