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A look into the relative performance of the stock market's different sectors sheds light on what is energising the rally on the S&P 500. There is a preference for cyclical stocks in companies that do well when the economy expands. That includes energy providers, which like higher oil prices.
Industrial and materials stocks are also faring well on the outlook for improved demand that comes with a cyclical upswing. Shares in the institutions that help fund increased economic activity are also leading the way, taking financials right to the top of the charts compiled by FactSet.
But the data provider points out it will be difficult to define how much of the expectations for a rise in earnings will come directly from the tax cuts. Gilt yields are lagging behind a rise in place in most major developed markets, with the clearest sign of the trend evident in the spread of Treasuries yields, over the equivalent UK debt.
The 10-year Treasury is now trading at about 1.4 percentage points above its UK equivalent yield, near the three-decade high it hit late last year. The gap represents investors' assessments of the country's differing economic outlooks.
The UK is trailing other developed economies, which are enjoying the global growth upswing more. Previous spreads peaked early in the year 2000, when the US tech bubble lifted bond yields, and reached a trough in 2008, when global central banks bought bonds in reaction to the financial crisis pushing yields lower. The political uncertainties of Brexit act as a drag on the economic outlook and thus are a boon for gilts' pricing.
If President Donald Trump wants to look good, this could be the ideal chart for him to use. Some investors will only accept that a proper bull run begins after the market has taken out its previous peak in real terms, making up for the selling of the bearish phase. And if we define it that way, then the current secular bull market in US stocks started on November the 9th, 2016, the day after Donald Trump was elected president.
Either this is a very big coincidence, or the new president deserves some credit for a new secular bull market. The animal spirits aroused by Mr Trump need to share the credit for the new bull market, with a belated arrival of global growth last year, which touched even the eurozone.
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