On January 20th President Trump was inaugurated and the equities rally that had started with the election continued with SPX rising 1.88% on the month to a new all-time high of 2281. All indices followed except NKY which was held back by a 3.57% appreciation in JPY.
In the UK Theresa May, gave a speech outlining her plans for Brexit negotiations and the Supreme Court ruled on the activation of Article 50. May confirmed that the UK would not look to retain access to the single market but would seek a free trade agreement with European neighbours. The Supreme Court confirmed that Article 50 could only be activated by a parliamentary vote. The increased detail on the UK’s future relationship with the EU and clarification on the pathway to get there saw GBP rally nearly 2% in January. USD was down across the board, particularly against NZD which appreciated by 5.66%. Gold and Oil were also well up on the month.
In February, NatSec Adviser Flynn resigned, saying he had “inadvertently briefed the Vice President-Elect and others with incomplete information regarding my phone calls with the Russian ambassador.” We also saw the first medium range North Korea missile test. Other than a brief wobble, the markets didn’t care, and SPX rose 3.88%. Again the bullish sentiment extended across all indices. USD had a much better month. DXY managed to rise 1.90%, as EUR, GBP, CAD and NZD gave up ground. However JPY made a slight 0.04% advance. Again Gold and Oil were up, but by less than January. This was the first month we really saw action in Bitcoin, it rose 23.7% to $1,191.
In March, as expected, the Fed raised interest rates from 0.75% to 1%. We saw the first ‘Russiagate’ effect. During a public hearing with the House Intelligence Committee, FBI Director James Comey publicly acknowledged that the bureau is investigating whether there was collusion between members of Donald Trump’s campaign and Russia. Additionally, Comey dismissed Trump’s claims that Trump was wiretapped by the Obama administration. The net effect of this was the only red month for SPX this year, and then only by 0.13%. However, DAX put on 4.73%, and NIFTY had a good month. NKY exactly reflected USDJPY weakness, both down 1.19%, and FTSE was flat, as was Gold, and Oil gave up some of the earlier months’ gains on OPEC cut concerns, and Bitcoin fell 10%. The crazy volatility had begun.
The French General Election in April saw Marine Le Pen taken center stage, with the markets in somewhat of a panic over whether France could be next to head for the EU exit door. When her vote missed estimates in the first round both EUR and the French CAC rallied. Macron eventually came out on top in the second round ahead of which the market tensions had already eased. Europe had managed to dodge another anti-EU political shift, with the Dutch and German elections also supporting the mainstream governments. Other indices (including SPX) put on modest gains for the month, the exception being FTSE which fell as oil fell and GBP appreciated. Gold was fairly flat.
On April 13th Donald Trump made a statement, saying that he thought the dollar was too strong in relation to other currencies. He certainly got a reaction. DXY was down 1.54% on the month due to strong appreciation in GBP and EUR only, the former being driven by the snap UK General Election call. JPY was fairly flat, and CAD, NZD and AUD were more than 2% down. A GBPCAD buy would have netted you 5.64% for the month, and Bitcoin 26%.
FBI Director James Comey’s sacking in May led to the appointment of former FBI director Robert Mueller as special counsel to investigate Russia’s involvement in the 2016 election. Special Counsel Mueller’s ongoing investigations into the U.S President’s election campaign took a lot of the spotlight. However, the most notable event was the publication of the existing of Comey’s memo on the 17th, where he noted that Trump had asked him to ‘lay off’. SPX fell 1.74% on the day, its worst day of the year.
The panic was short-lived, the index recovered fully inside a week, and put on 1.34% for the month, although again this was weaker than other indices. The best performer was FTSE which put an amazing 5.17% on in anticipation of the Conservatives increasing their majority in the forthcoming election.
May was another bad month for USD, with DXY fading nearly 2%, and only AUD declining as Gold held flat. Bitcoin really took off, adding over 70% to finish at an all-time high of $2,298. Oil gave up ground again staying below the psychological $50 mark.
It all went wrong for Theresa May’s ruling Conservative Party on 8th June, where she lost her overall majority. GBP plunged 2.39% in two days, and FTSE fell as well. Mario Draghi’s speech in Sintra saw equities sell off and the Euro to rally. Draghi emphasised that the ECB believes the forces currently weighing on eurozone inflation are temporary. The Fed raised interest rates again as expected by another 25 basis points.
The dollar faded again against all currencies except JPY. Even GBP managed a modest gain in the month, and AUD, NZD and CAD put on over 3%. SPX was flat in this summer month, as was NIFTY after five strong months, but DAX and FTSE were down. Only NKY made a decent advance due to JPY weakness, with USDJPY posting its first green monthly candle of the year. Oil declined further to a monthly low for the year of $46.21
In July, the US Senate rejected bill to repeal Obamacare in huge blow for Trump, and North Korea used Independence Day to launch a missile. The effect was seen in USD, where DXY had its worst month of the year, down 3.21%. The dollar fell against all major currencies. Gold was up, and Oil had a very strong run, up 8.57%.
The indices picture was very mixed. SPX held on, as it always seems to, adding 47 handles, and NIFTY resumed its upward path. However strong currencies weighed on DAX and NKY which lost ground.
On August 26th, three short-range missiles were launched around early morning from a site in Gangwon Province, with the second one appearing to have blown up almost immediately while another two flew about 250 km (155 miles) in a north-eastern direction, before crashing in the Sea. SPX by this time had ‘missile fatigue’ and didn’t move. It was completely flat during this holiday month, as were other indices (as viewed in USD, ie they only reacted to currency movements). Notably, Gold (up 4.12%) and Oil (down 6.22%) were quite volatile for a summer month.
USD had, by current standards, a good month, with DXY (and CAD and JPY) more or less flat. The only standout decline was in NZD, down 4.5% on fears of a Labour Party, or even worse, far-right coalition, in the forthcoming election.
North Korea conducted its sixth nuclear test on September 3rd, stating it had tested a thermonuclear weapon (hydrogen bomb). The market wobbled but quickly reversed back upwards, and the lack of a missile (expected) on NK National Day on the 9h caused a gap-up market rally, and when the missile was finally launched a week later, th effect was brief and muted.
The Fed also announced that it will begin reducing its balance sheet starting October, and New Zealand’s election result was inconclusive, with the far-right party holding the kingmaker position, and NZD was fairly flat on the month. The month closed with Angela Merkel being re-elected in Germany, but with a reduced share of the vote.
The result of all this? Another good month for SPX, its best since February, and by far the best month of the year for DAX, up 6.44%, with a EUR decline of 1.05% only a small part of that. Commentators viewed this as a possible quarter-end rotation into Europe given the high PE ratios of US stocks. FTSE did not share this largesse, although its decline of 1.19% was considerably less than that 3.41% appreciation in sterling, as there appeared to be some progress on Brexit. GBP was the exception, otherwise USD saw advances against EUR, AUD, CAD and JPY. Gold and Oil reversed their August positions, in particular Oil’s 9.61% gain was partly attributed to supply losses because of Hurricane Harvey in Texas, and partly to Kurdish oilfields becoming a warzone.
October brought the Catalan independence crisis, and ‘illegal’ referendum. There was a dip in the euro, and particularly in the Spanish IBEX index, but overall another bullish month for equities across the board. The snap election in Japan on the 22nd returned Shinzo Abe and his ruling LDP, and this had a strong effect on the NKY, up over 9% for the month. NZD was sharply down on post-election uncertainty.
USD was actually up against all currencies for the first time in 2017. Gold was down in line, and Oil continued its post-hurricane rise.
In November, the Bank of England raised interest rates by 25bp and the ECB announced tapering of asset purchases. This helped EUR and GBP rise against against USD, although AUD and NZD fell again. NKY carried on rising, assisted by the weakening yen, but strong currencies once again weighed on the European indices, which gave up ground. CAD remained flat, despite NAFTA talks running into difficulties.
President Trump toured Asia (including South Korea) in the early part of the month, , and the lack of any reaction from the belligerent North kept SPX rising to close up 2.52%, its best month since February. The Kim regime did launch a missile at the end of the month, but there was no market reaction.
After Thanksgiving was Black Friday, and traders didn’t even wait for Amazon’s claims. The stock gapped up on the day, and closed 2.56% up. When the company claimed half of all online sales on the day, it gapped up another 1.43% on Monday, and finished the month 6.5% up.
December saw the Fed increases interest rates from 1.25% to 1.5%, which was widely expected, and Trump’s nomination of Federal Reserve Governor Jerome Powell to replace Chair Janet Yellen at the helm of the Fed, and more importantly, the tax bill was finally passed. Catalonia had another general election, again voting in the separatists. German Chancellor Angela Merkel failed to form a coalition government following elections last month.
Special Counsel Robert Mueller had charged Flynn with lying about his conversations with the Russian ambassador and Flynn pleaded guilty to this. On the 1st, Flynn had said Trump had asked him to talk to the Russians, and an ABC report suggested this was before the election and therefore illegal. The market sharply dropped 1.72%. But the ABC report turned out to be false, the instruction came after Trump was elected, and of course the market recovered, With thee tax bill added to the Santa Rally, SPX had its best month of the year, up 3.73% closing at an all time high. In fact virtually all indices, including the FTSE All World made record highs, with only NKY posting a red candle for the month. Oil also
USD had a slightly better, or rather a less worse month, in that DXY was less than 1% down, with GBP and losses balancing EUR gains. Gold was up in line, however yields were up slightly. OPEC cut extensions and oil pipeline cracks in the UK and bombing in Libya gave Oil its best month of the year, finally touching the psychological $60 mark. Bitcoin, which has rewritten the rules on bubbles, had its third month of over 40% monthly gain, nearly touching $20,000 before pulling back over 25% to finish the year at $13,863.