US stock markets are doing the V shaped curve with a Donald Trump victory. The Republican win will probably give a boost to the bull market. This is seen in the numbers: the DJIA or Dow Jones Industrial Average went up by 5.4 percent during the second week of November. This is the stock market’s maximum gain since the October 2014 period. The NASDAQ composite ended the week 3.8 percent up. The market was languishing until the news broke of the real estate billionaire’s win.
Elections and the market
Relief provided fodder to such gains. The presidential election has stymied the market as investors arranged their portfolios to make sure that they survive a renewal of fiscal spending. A special report authored by analysts working in Deutsche Bank stated that markets until now have given the presidential results the benefit of the doubt. It seeks to embrace any probable fillip to inflation and growth which could come from a policy shift. It also helped that this election coincided with an earnings recovery. Better economic outlook will push up stocks in a rebound. This downswing and upswing could be in the shape of a V when depicted in a technical chart.
According to Binny Chadha, the bank’s chief strategist, it is to be noted that such a recovery was already in progress. The market’s third quarter was the start of a strong recovery in the growth of earnings. This suggested a rise in the corporate profits which may clock even 10 percent in 2017. There could be a similar rise in the economic growth due to the bump up of capital expenditure and exports. The stocks may also move up due to “attractive upside calls”. For Goldman Sachs analysts, queries regarding corporate taxes may be the oft repeated discussion topic during the second week of November.
President-Elect Donald Trump, as part of his electoral pledge, had promised to cut the federal tax rate of 35 percent to benefit US companies. If this is done, it may go as low as 15 percent. This will make the American tax rate one of the lowest among the developed nations as per Goldman Sachs. Trump has also proposed the exemption of taxes that are presently imposed on overseas revenues. This makes the way for multinational American companies like Apple to repatriate funds that it already has currently parked outside the country.