The “Trump rally” following Donald Trump‘s unexpected victory at the US Presidential Elections has lost its momentum. Notwithstanding the political uncertainty in the US and the Eurozone, noting that Trump has withdrawn his accusations of China being a currency manipulator and the UK Prime Minister Theresa May’s call for a snap election to bolster her political stance – could these end the rally? Are these threats to the “Trump rally” or will these end the eight-year-old US equities bull that has been alive for much longer than most economists had expected?

UBS Research‘s Chief Investment Officer (CIO) thinks the global stock market rally might still continue because of strengthening economic growth, “normalisation” of interest rates and some visible recovery in corporate earnings.

Nevertheless, UBS Research highlights three key points in their optimism for the global stock market rally to continue.

1. Real interest rates are still very low compared to history, despite an expected three hikes from the US Federal Reserve this year – that supports stocks.

History suggests a Fed rate hike need not knock US equity performance. Since 1971, the S&P 500 Index has returned very similar amounts in the 12 months after a rate rise (+11.2 percent on average) compared to the all-period mean (+11.8 percent).

2. And firm consumer demand, with higher oil prices, suggest US earnings growth can rise to 11 percent this year.

3. 10 percent of S&P 500 companies by market capitalisation report first quarter earnings in the week beginning 17 April. The consensus expectation is for a bright quarter of nine percent year-on-year earnings growth.

If realised, that would be the strongest pace of profits expansion since the third quarter of 2011. The S&P 500 Index has returned an average 7.3 percent (since 1991) in the six months after a US manufacturing gauge (ISM) is in strong expansion territory (55 – 60). The headline stood at 57.2 in March.

Conclusion – Overweight global and US equities

While the UBS CIO is bullish on global and US equities, volatility is expected to surge in 2Q17 so it might be tactical for investors to add some “low volatility” and “cost-effective” assets to balance their portfolios.

UBS’s one-liner: “Global economic growth, continue low real rates, and an improving earnings outlook suggest the global stock rally can resume.”

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