Evdokia

Evdokia Pitsillidou, Head of Risk Management at easyMarkets.

She specialises in commodities, options and currencies and loves to solve analytical problems and overcome challenges.

July-September was another record-breaking quarter for Wall Street, as investors rallied behind upbeat corporate earnings and expectations of tax reform under the Trump administration. European markets in September also rung up their best month of 2017, a sign that the bull market still had legs.

The Dow Jones Industrial Average rounded out its eighth consecutive quarterly advance in September. That was the first such streak in two decades. The large-cap S&P 500 Index ended the quarter at record highs, rising nearly 4% over the three-month period. Meanwhile, the technology-heavy Nasdaq Composite Index posted quarterly gains of 5.8%, marking its fifth straight positive quarter.

European markets haven’t been nearly as robust this year, but still managed to round out a solid quarter. The Stoxx Europe 600 Index ended the quarter with a return of 2.3%. With the gain, the European benchmark is up nearly 4% since December.

Nothing appears to be stopping equities at the moment, as investors continue to eye another upbeat earnings season. For Q3 2017, the estimated earnings growth rate for S&P 500 companies is 2.8%, according to financial research firm FactSet.

Markets are also eyeing new revelations on U.S. tax reform after the Trump administration laid out its ambitious plan to reform the tax code. President Donald Trump has referred to the tax plan as a “once-in-a-generation” opportunity. He’s partly correct, given that no other proposal of this magnitude has passed in 30 years.

The holiday season could also provide a tailwind for U.S. and global equities, as retail spending and Christmas cheer lift investor sentiment. Retailers are officially in holiday mode on 1 November.

Market participants these days are less jittery about North Korea, and not because the threat has diminished. As it currently stands, investors aren’t buying the war of words propaganda between the President Trump and Pyongyang. This was evident in September after North Korea fired its second missile over Japan in as many months.

The next few months are also significant from a policy perspective. The Federal Reserve is expected to raise interest rates in December. Officials at the Bank of England are also preparing for a rate hike.

 

[1] Evelyn Cheng (29 September 2017). “Dow posts first 8-quarter win streak in 20 years.” CNBC.

[2] Sara Sjolin (29 September 2017). “European stocks ring up best month of 2017.” MarketWatch.

[3] FactSet (6 October 2017). Earnings Insight.

[4] Jeremy Diamond and Kevin Liptak (28 September 2017). “Trump sells tax plan as ‘once-in-a-generation’ opportunity.” CNN Politics.

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