Much hinges on US election, rate policy

October 2016

Central bank policies and political events could have an uncertain effect on markets.

From the divisive race to the White House to lowering bond yields, risk is prevalent, says Mark Rider.

In our latest quarterly Market Horizon video we round up what’s happening in investment markets and expectations for the rest of 2016.

The US election is dominating the headlines with good reason. To be decided November 8 between Donald Trump and Hillary Clinton, trends in the sharemarket suggest Clinton is a likely winner.

Markets are likely to react quite differently depending on the winner. Trump’s protectionist stance will affect trade agreements and therefore other particular areas of the economy. While Clinton’s drug-price policy will impact big pharmaceutical companies, while the infrastructure sector could benefit heavily.

We’re also seeing a continuing rally in sharemarkets, as investors take confidence from central banks’ ongoing support of economies around the world. There’s not many areas of growth, with bond yields low, so investors are primarily focused on shares right now, driving up prices.

Though there’s evidence low rates may be hurting economies, from Japan, to the US, rates are being kept low. All eyes on the US Federal Reserve which looks to be the most likely to increase rates, but will need to see higher inflation to start increasing them.

With the election and other fundamental risks remaining, ANZ’s is holding to a cautious investment position.

ANZ Market Horizon – September

ANZ Market Horizon – September

ANZ's chief investment office outlines trends in global markets and what we can expect.