A pending Trump presidency and a Republican clean sweep of Congress took markets by surprise, but despite the considerable uncertainty this represents for policy direction in the US, markets chose to focus on the anticipated positives from fiscal expansion and ignore the potential for trade disruption. Although the ‘No’ vote in the Italian constitutional referendum was expected, this too raises questions for the future of the Eurozone given the support for anti-EU parties in the country.
Optimism for a resurgence of economic growth and the anticipation of rising inflation has caused bond yields to rise and capital values to fall. The US Federal Reserve finally raised rates for a second time in almost a decade, and the market expects two or more further rises in 2017, although the current strength of the US Dollar could cause the Fed to be cautious.
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