Investors weigh Trump’s nominations

Our weekly market overview from Quilter Cheviot

By Richard Carter, Head of Fixed Interest Research

Global equities recovered some recent declines last week, with the MSCI All Country index rising 1.4% (19.7% YTD). Investors are still assessing what the incoming Trump administration means for markets and geopolitics, but the overall feeling remains one of optimism.

United States

US stocks slightly outperformed last week to gain 1.7% (26.7% YTD) with an encouraging broadening out of the move higher as equal-weighted indices outpaced their capitalisation-weighted equivalents. It was a good week for small caps as they rose 4.5% (20.1% YTD) while tech stocks added 1.8% (27.4% YTD).

Nvidia’s latest results were the standout data point in a relatively light calendar, showing impressive growth in revenue and earnings although future guidance was a little lower than some had hoped for. By the end of the week the stock was little changed and with the vast majority of third quarter earnings figures now public, it’s apparent that US corporates continue to deliver strong results.

US Treasuries continued to trade in a tight range, with the 10-year yield dropping 4 basis points on the week to 4.40%. The nomination of Scott Bessent for Treasury secretary saw a slight drop in yields when markets resumed trading on Monday.

United Kingdom

UK stocks posted a solid 2.5% weekly gain (10.6% YTD) as a further depreciation in the pound to US$1.25 provided a favourable currency effect. Mid-caps, seen as a fairer reflection of the UK economy, underperformed to rise 0.6% (7.7% YTD). Economic data came in on the negative side with business activity moving into contractionary territory after 12 months of expansion and inflation increasing to 2.3% from 1.7% previously. The 10-year gilt yield decreased 9 basis points on the week, ending at 4.38%.
Europe EX UK

Economic data in the Eurozone continued to flash warning signs, increasing expectations of a larger European Central Bank (ECB) cut at its December meeting. The MSCI Europe ex UK index rose 0.7% on the week (6.9% YTD), with Germany (0.6%, 15.3% YTD) faring better than France ( -0.2%, -1.0% YTD) and Italy (-0.8%, 16.5% YTD). Diverging economic performance and recent political developments have seen a rise in calls for parity in the euro to US dollar exchange rate and last week the currency pair fell to 1.04, a two-year low.

Bessent nomination welcomed

Financial markets responded positively to the news that Scott Bessent has been nominated as the US Treasury secretary, with the move seen as decreasing the chances of a maximalist approach to trade tariffs. US Treasury yields and the US dollar declined on the news while stock futures gained. Bessent, a hedge fund manager, has previously indicated that he favours a more balanced approach to implementing trade tariffs and is also viewed as someone who would look to curb a widening fiscal deficit.

Bessent has said he stands by the US dollar as a reserve currency and has previously suggested he would not look to deliberately depreciate the currency. Bessent is expected to favour market forces rather than government intervention, an unsurprising position for someone who made large profits betting against the Japanese Yen and the British pound for former boss George Soros.

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