March 3, 2017 6:20 am JST

Global market cap roars toward record after Trump speech

Simultaneous rise in gold indicates lingering concerns

The Nikkei Stock Average briefly topped the year-to-date high Thursday while the Dow Jones Industrial Average hit a new record Wednesday.

TOKYO -- Expectations of massive fiscal spending under U.S. President Donald Trump, along with strong economic indicators, are lifting global stocks to new highs, with aggregate market capitalization inching toward the record.

The tide is also elevating equities in emerging countries. Switzerland's Pictet decided to increase its holdings in such assets during a recent telephone conference with global investment managers. The group has shied away from the Trump rally, citing political uncertainties, but this time around nobody objected to the move, said Hiroshi Matsumoto at Pictet's Japanese arm.

America's NWQ Investment Management is sending researchers to visit Asian and European corporations this month. Value stocks can still be found in emerging countries and Europe, said Managing Director Peter Boardman.

On Wednesday, the Dow Jones Industrial Average rose by its largest margin this year to sail past the 21,000 milestone. Though Trump did not elaborate on his policy goals during Tuesday's speech to Congress, the market reacted favorably to his presidential performance, said Andrew Husby at Decision Economics, a U.S. research firm.

"Since November 8th, Election Day, the stock market has posted $3.2 trillion in gains," Trump boasted on Twitter Thursday.

The frenzy has also reached this side of the Pacific. On Thursday, the Nikkei Stock Average gained 0.9% to finish at 19,564, nearing a high reached on Jan. 4. The intraday peak touched the highest level since January 2016.

Global markets are apparently in the middle of a second act of the Trump rally. During the first act following the presidential election, capital shifted from U.S. Treasury bills and emerging-country equities to stocks in developed nations. But since the start of the year, the flow of funds has spread to a wide spectrum of assets, including real estate investment trusts, which offer steady returns.

Estimated global market cap rose Wednesday to $73.8 trillion, approaching the $75.6 trillion record set in May 2015. Indexes in Argentina, Venezuela and other emerging nations have been leading the way in growth since Jan. 1.

Underpinning the advance is worldwide economic growth. In February, the global purchasing managers' index recovered to a level not seen in five years and nine months. The international price for copper jumped to a 21-month high amid healthy Chinese demand.

Trump stressed both infrastructure spending and deep tax cuts during his maiden address to Congress. Back in May 2015, monetary easing programs in Japan, the U.S. and Europe fueled the gains. This time around, fiscal policies are helping put equities into high gear.

Trump's ambitions face considerable hurdles, however, such as questionable revenue sources and a potentially recalcitrant legislature. That could render hopes for a sustained stock rally premature. The price of gold is also rising, meaning investors are "hedging against political risks and inflation in Western nations," said Daiju Aoki at UBS Wealth Management.

(Nikkei)

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