Surprises

While many investors had expected a Trump victory to be negative for the equity markets, against all expectations, as a result of this unexpected victory, for the first time since 1999 all four major US equity benchmarks (S&P 500 Index, Dow Jones Industrial Average, Nasdaq Composite Index and Russell 2000 Index) climbed to a new historical high.

Against this background, rates rose in the US not only because a Trump victory was seen as reflationary but also because, on 17 November, US Federal Reserve chair Janet Yellen said that an interest-rate increase could come "relatively soon". She also added that, considering the low unemployment-rate environment in the US, there was not much of an opportunity for the new President to embark on a major spending spree.

Macro-economic data also pointed to higher rates in the US as the October durable goods orders data published on 22 November came out at +4.8% while market participants were expecting less than 2% growth even following a surge in orders for commercial aircraft.

In this “cyclical” context, Industrials and Financials outperformed massively in November while Staples and Utilities were the clear losers of the month

Our sector allocation paid well in November, as we were overweighting Financials and Industrials, and underweighting Utilities, a rate-sensitive sector

• In our strategy, we consider that Finance will continue to be boosted by curve-steepening, and Cyclicals by the fiscal stimulus and possible intensive news flow driven by Donald Trump as fresh effective president
• We are underweighting “bond proxies”, which will continue to suffer, e.g., Utilities, Telecom
• We are avoiding Consumer Staples, which should be impacted by the strong USD and the interest-rate rise.