The 10,000-point question (it isn't really a question)

Posted by: Paul Donovan

15 Apr 2019
  • Central bank independence is in focus again. US President Trump suggested that Fed policy had cost the US equity market 5,000 to 10,000 points of gains (presumably using the thirty stocks of the Dow Jones Industrial Average). Over 40% of that index is tech and industrial companies. These sectors suffer from the increasing burden of US trade taxes (which are effectively a tax on equities).
  • The IMF's taxpayer-financed mini-break in Washington concluded that trade tensions were the biggest threat to the world economy. This is a "well, duh" conclusion, which economists could have arrived at for far less expense. China's trade data showed very strong exports of consumer goods (more than a lunar new year bounce back), but soft imports of investment goods.
  • There are central bankers from the UK, the Eurozone and the US all speaking, but markets are unlikely to change views on the direction of policy. Markets are already very dovish in their expectations.
  • The Finnish general election produced a fragmented result. The center-left Social Democrats are (by one seat) the largest party, ahead of the anti-establishment Finns. Investors may (unwisely) try to extrapolate the support for anti-parties into other countries, ahead of next month's EU parliamentary elections.

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