Global Indices Monthly Outlook – March 2017

American Stock Indices On a Tearing Run

The stock markets in the USA have just had a fantastic month as the Trump trade continues to rule the roost as far as the US is concerned. The main reason for this is the fact that the markets and investors in the US are getting more and more used to Trump and his ways and with each passing day, they believe that they know more about what he will be like and this has helped to drive away the uncertainty surrounding his administration.

The markets, especially the stock markets, love him as he is a businessman and has promised to increase spending which will help businesses and companies. He also announced that there would be some major tax cuts for corporates in the near future and this cheered the markets even further. Also, his protectionist policies are likely to increase jobs and keep the economy healthy, or atleast thats what the market believes, and what this has done is to make the stock indexes in the US reach record highs everyday. The second half of the month has all been about how the indexes have been outdoing themselves each passing day and setting records almost everyday.

Looking ahead to March, we believe that the Trump trade is likely to continue. The expectation that the Fed might hike rates in March is slowly receding and what this would mean is that the funds would get diverted into the stock markets which would help them to rise even more.

Technically also, the indexes are at their record highs and there does not seem to be anything stopping them going higher and higher technically. The only way that this rally could be stopped is for the fundamental factors that drive this rally, to change.

Tight Trading in Europe

The month of February, in the European stock markets, has been characterised by the inability of any of them to break their range and continue their bullish run which began towards the end of last year. January was a slow month, which was understood to have been caused by the uncertainty over the takeover of the US Presidency by Trump and what policy changes he could bring in, that could affect the markets. But as the month of February wore on, as the US investors and traders began to embrace Trump and his policies, the international investors seemed to be reluctant to do so.

Also, Europe has been dealing with its own set of problems in February which includes the Brexit process, the upcoming French and German elections and the bailout of Greece. The risks and fears surrounding these events weighed on the respective stock markets as a result of which, none of them could break the high from January. The DAX briefly touched 12000 before falling into range and it was the same case with the UK100 as well.

Looking ahead to March, we expect the investors to become increasingly wary of the events specified above as they get closer and closer. This is likely to keep the markets jittery and we may also start seeing signs of a correction. We expect the DAX and the UK100 to begin correction as the bulls find it difficult to sustain the bull run.

Technically also, the fact that the bulls have not been able to break the January highs of the range, clearly and cleanly points to a period of consolidation and correction as well. The stock indexes have been ranging within a tight space for far too long and the bulls are beginning to lose steam, clear signs that a correction is upcoming.

Asian Markets Look for Correction

Like their European counterparts, the Asian stock markets have also been having a tough time during February as they traded within a tight range and they have been unable to break through the January highs. The J225 index did trade above 19500 for a brief while but this was short lived and like the other Asian bourses, it began to fall towards the end of the month.

Looking ahead to March, we believe that a correction is due in the Asian indexes as well but where it will all begin and how big the correction will be, is something that remains to be seen.

Technically also, the charts of the stock markets in the Asia Pacific region look pretty similar to those in Europe and this points to a period of consolidation and correction in March.