HONEYMOONS don’t last for ever. Having been a reluctant bride to President Donald Trump when courted in the run-up to November’s election, the American stockmarket quickly melted into a mood of romantic euphoria. Shares rose by 12% between election day and March 1st (see chart). But in recent days, sentiment has dimmed. There is talk of the “Trump-disappointment trade”.
For the markets to experience some kind of sell-off is hardly a surprise. The S&P 500 index had gone more than 100 days without a 1% decline, the longest such streak since 1995. And the setback should not be exaggerated. The S&P 500 remains well above its pre-election level, compared with the dollar, which has given up around half its gains. The ten-year Treasury-bond yield, which hit 2.62% on March 13th, has dropped back to 2.38%.
The immediate cause of the retreat seemed to be the failure of Mr Trump to repeal his predecessor’s health-care bill. That logic was hardly a great advertisement for capitalism, implying that the fewer Americans had access to health insurance, the happier investors would be. But the broader rationale seemed to be that, if the Republicans…Continue reading