/ PROFIT-TAKING /
“ The economic data has repeatedly outperformed the gloomy predictions ” rate expectations hitting financials particularly hard .
“ This could have a knockon effect on consumer stocks . Basically , there would be a pretty widespread sell off ,” he warned .
For investors sitting on comfortable gains owing to Brexit and Trump , this is the big risk in 2017 , the year when
2016 ’ s two big surprises evolve from conjecture into hard reality . The conundrum is ultimately whether investors expect inflationary or deflationary pressures , but as this depends on the actions of a man prone to unpredictable behaviour , taking a strong view either way on 2017 may prove to be a fool ’ s errand .•
This suggests the central bank was too hasty in introducing yet more monetary stimulus , which has contributed to the fall in sterling .
In the US , the biggest risk is that Trump doesn ’ t have a quick fix to boost growth and deliver on his promises . Simon Evan-Cook , senior investment manager at Premier , says any suggestion that the new president simply represents an extension of the status quo rather than a clean break from it could quickly bring markets back to earth .
“ Much of the recent rally rests on the belief that his policies will redistribute wealth away from the high-saving , low-spending wealthy to the low-saving , highspending working classes . So any back-tracking on , or signs he will be thwarted by vested interests , would put the brakes on the reflation rally ,” he said .
Haynes warns this could happen sooner rather than later if Trump ’ s rhetoric fails to translate into material policy changes , particularly if Congress prevents him from borrowing more in a bid to stimulate growth .
“ If economic growth disappoints , then investors may retreat back to safer assets , particularly as bond yields have risen to 2.5 per cent for a 10-year Treasury ,” he said .
Morgan adds that cyclical stocks in the UK and US could be hit if infrastructure spending fails to meet forecasts , with lower interest
80 % 60 % 50 % 40 % 30 % 20 % 10 % 0 % -10 % -20 %
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Source : FE Analytics
PERFORMANCE OF SECTORS SINCE 23 JUN
FTSE 350 Mining ( 53.71 %) FTSE 350 Pharmaceuticals & Biothechnology ( 12.96 %) FTSE 350 Tobacco ( 5.90 %) FTSE 350 Financial Services ( 3.88 %)
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