And, it will probably surprise no one, it has to do with president Donald Trump.
In a report by Credit Suisse analyst Lori Calvasina, to better understand the short term performance trends seen in the aftermath of the US Presidential election, and which trades may be most sensitive to shifting winds in Washington going forward, the Swiss bank analyzed how a handful of major macro indicators, stock market indices, styles, themes, sectors, and industry groups have been trading relative to trends in Trump’s favorability since the election, as tracked by Real Clear Politics.
What it found is that US stocks have been trading closely with shifts in Trump’s favorability, as have 10 year Treasury yields, the Dollar, and crude oil. Within US equities, small caps, value, Financials, cyclicals, domestic revenue producers, and high tax payers have been particularly tied to shifts in Trump’s favorability, as has the performance of companies headquartered in states that voted for Trump.
Said otherwise, everything is trading in lockstep with Trump’s shifting approval rating!
In short, in addition to reflecting asset prices across virtually every asset class, what happens in the S&P (or any other market) has a direct impact on Trump’s approval rating. Or perhaps vice versa – the direction of causality is not exactly clear on this one.
This post was published at Zero Hedge on Feb 6, 2017.