The US share market (the Dow Jones Industrial Average) went up from about 19,000 (a number used to represent the overall value of a lot of the really big US companies) when Donald Trump was elected in November 2016, to about 26,000 in the last few days of January this year. That’s an increase of stellar proportions. Where is it now? Back down a bit, to about 24,600.
So, why has it fallen in the past week or so, and does it matter? Markets rise and fall every day, but sometimes they do it more than others. President Trump has managed to get through significant company tax cuts (which puts a lot of pressure on us here to do the same), the US company reporting season has shown that they are growing well, and global growth forecasts are increasing too.
On the down side however, there’s a new US Federal Reserve Chairperson (Jay Powell), who has indicated that US interest rates will need to climb, and now wages growth is accelerating too (certainly not a problem for Australia – unfortunately). Both higher wages and higher interest rates mean than the price of the money that companies borrow, increases. This reduces profit. Companies get a little nervous when this starts to occur, and share markets always seem to hate it. “You’re doing really well, so we’d better start getting back to normal lending conditions” seems to spook everyone. It doesn’t really make sense to me, but it is just the way it is. I would have thought that knowing you’re in good shape would be a good thing!
The share market takes the stairs on the way up and the elevator on the way down, as they say. It seems to have taken the escalators on the way up for President Trump, rather than the stairs, so I wont’s say that this will be the beginning of the end, the end of the beginning or something else, but I do have an opinion. A newsletter however is not the forum for that opinion.
If you’re keen to chat about what this means for your investing, or your superannuation, then we’re here to help. We can have a general conversation (not financial advice) on the bike or you can meet me for a more formal meeting where I can take in to account your individual circumstances, and actually give you financial advice.
Feel free to contact me on firstname.lastname@example.org, 13 000 KOMFA (13 000 56632) or 0419 461 951.
Note that this article is in no way meant to represent personal financial advice. No individual circumstances have been considered in this newsletter. This is general information only. Full Financial Advice Pty Ltd ABN 92 606 914 112 t/a King of the Mountain Financial Advice is a Corporate Authorised Representative of PATRON Financial Services Pty Ltd ABN 13 122 381 908 ATF PATRON Financial Trust ABN 32 307 788 137 AFSL No. 307379 trading as PATRON Financial Advice (PATRON)