The bull roared last night as stocks in Europe and the US ripped higher taking the big indexes in the US to fresh record highs.
That such a level of bullishness, and absolute price levels of the indexes, could have existed in a world where Donald Trump is president-elect was almost unimaginable by most investors and equity strategists just a few months back.
Which makes the findings of the latest Reuters poll on the outlook for the stock market all the more interesting.
Reuters reported via its latest poll that ” hundreds of upbeat strategists” are bullish stocks in 2017, braving a long list of political uncertainties just as the fuel behind the historic post-financial crisis rally runs dry.
That’s a massive shift in sentiment from the last Reuters poll back in October, before the US presidential election.
It’s a remarkable turnaround with Reuters highlighting that the previous survey showed “a majority said his [Trump] protectionist threats on the campaign trail augured for a decline in world trade and a poor economic backdrop for stock markets propped up on central bank cash”.
But what a difference a month or two makes.
“Now, a majority of those same analysts say his plans to slash taxes for individuals and businesses, well-understood before the election, as well as infrastructure spending, ought to boost lacklustre economic growth and push shares higher,” Reuters said.
The survey noted there was some tempering of the bullishness with overall concerns about the negative aspects of Trump’s policy platform. But there is no getting away from the big turnaround in sentiment which helped drive stocks to new record highs across US indexes last night.
The corollary of these moves offshore is that the ASX200 this morning has rallied 50 points, 0.92%, to 5529. That’s taken prices above the downtrend line which stretches back to the highs around 6000 during 2015.
But the big question is whether the US rally, which has seen the physical S&P 500 rise 7.6% since November’s lows, with a trough-to-peak move in the ASX200 from the day of the election till today’s level of 5530 of 9.5%, is overdone?
We know from BAML’s global investor survey that big institutional fund managers were recently carrying the most cash in 15 years. That provides a lot of firepower for the rally in stocks.
But CNN’s Fear and Greed Index has moved from fear to extreme greed over the past month, suggesting the rally in the short-term might be a little overdone.
Then again as Time said when making Donald Trump Person of the Year “it’s difficult to count all the ways Trump remade the game”.
Stocks market investors, and the hundreds of analysts in the Reuters poll are betting he’ll do the same the US economy and corporate America.