Business as usual returns to equity markets

The US election results, assuming they play out as expected, green-lighted the return of the FOMO buys everything trade. Markets did not even wait for the results yesterday, a measure of just how much cash was on the side-lines desperate to jump back in. Equities rose impressively yesterday, with big tech outperforming in the future of work/life/shopping mega-trend trade. The Nasdaq leapt by 3.85%, with the S&P 500 equally impressive, rising 2.21%, and the Dow Jones climbing 1.35%. A Republican Senate was bullish for equities, no matter who became president.

With the status quo seemingly inevitable now in the US, Asian markets have not hesitated to follow Wall Street’s lead. In fact, the Nikkei 225 has been powering ahead for the past few days in anticipation. Today the Nikkei 225 is 1.25% higher, with the Kospi up 1.42%. China’s Shanghai Composite is 0.60% higher, and the CSI 300 is 0.75% higher. Hong Kong has jumped by 2.05%, and both Shanghai and Hong Kong have moved past Ant Financial’s IPO cancellation at light speed. Making money waits for no man.

Singapore has jumped 1.66% with leading banks posting better than expected Q3 results. Kuala Lumpur has risen 1.20% having underperformed all week. Taiwan has increased by 1.0%, and Jakarta is 1.55%. Australia, ever keen to follow Wall Street slavishly, has responded in kind. The ASX 200 and All Ordinaries have risen 2.45% today.

The bulwark of a US Republican Senate is a roadblock to Democrat extravagant fiscal stimulus and tax increases; we can forget that pivot to renewable energy too. While the planet may not be happy, financial markets will be. The onus will fall on the Federal Reserve via monetary policy to pick up the pieces. That means more bottomless amounts of free money and the backstopping of idiotic business decisions via the corporate bond market. What’s not to dislike about equities in that environment, as the search for yield, any yield, returns?

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