It seems as if the markets have continued powering ahead in spite of Trump’s aggressive and sometimes rather incoherent tweets. In fact, since Trump’s election on 8 November 2016, the MSCI World Index has risen by roughly 17% in USD. Some, in fact, attribute the market’s strength to Trump and his bold, sometimes aggressive public views on social media.
However, roughly coinciding with Trump’s election, were the rise of the oil price from USD29 to USD50 and the continuation of ultra low risk-free interest rates, which investors use to value companies, helping to fuel rising asset valuations. The recent rise in global markets has, therefore, probably less to do with Trump’s policies, promises and tweets and more to do with market fundamentals.
While market speculators are focusing on short-term news flow, astute investors are studying market fundamentals, carefully, which are currently signalling that there are pockets of significant overvaluation.
Snapchat, amongst other large tech companies, for example, is trading at 46 x revenue and not making a profit, Tesla which currently produces less than 77 000 cars per annum is now worth more than General Motors (GM) which produces in excess of 10 million cars. Investors, therefore, should, be wary of basing investment decisions on short-term news flow and only invest with reputable fund managers, who base investment decisions on quality research.