It’s been a couple of months since we last published updated Coppock indicators, but the break means that we have had plenty of time to weigh up the effects of Donald Trump’s surprise victory in the US presidential election on 8 November.
A scan of the latest readings show, unsurprisingly, that the effects have been most keenly felt in the bond markets – the majority of government bond indicators we track moved into sell territory in November (following Japan which got there a month earlier), a signal that investors have now definitively concluded that Trump’s policies will be inflationary and that the only way for the Fed Funds rate is up. Given this backdrop it is notable that the one exception is UK index-linked Gilts.
As for the equity markets, there has been little change. Throughout the course of 2016 most indicators flipped to buy, such that of the 39 indices that we track only 5 are currently reading sell, with Ireland’s ISEQ and Russia MICEX the latest to turn bullish. One index going the other way is Mexico’s IPC Bolsa, a reflection of investor’s nervousness that President Trump’s trade policies may have a particularly damaging effect on its southern neighbour – certainly any hope that campaign rhetoric against offshore producers such as Mexico would be toned down in the reality of office has rapidly evaporated in recent months. Investors should be mindful that the implications of this hardening policy shift could spread further afield.