Following the US presidential vote, the real estate, telecommunications, consumers and utilities sectors underperformed.
Real Estate, Telecoms among Stocks That Have Lagged Under Trump
Industries in the real estate, telecom, consumer staples and utilities saw their stocks underperform as investors preferred shares of companies tied directly to economic growth.
Even then, these underperforming stocks are now witnessing a gradual rally.
In the first half of the month of February, the health sector in the greater Europe rallied with 4.8 percent, an indication that other sectors are joining the party caused by the Trump effects, noted Stephan Barbier de la Serre of Makor Capital Markets.
This month, healthcare, utilities and real estate in Europe are among the best performing stock. In the US, companies in the technology, pharmaceutical and consumer staples rose 2.5 percent each in February.
Speaking from Geneva, “In the initial part of the Trump rally the defensive sectors were lagging behind.”
He added, “They are however rising alongside the cyclical sectors, which is an indication that the rally from equity is gaining momentum. Many big investors were doubtful about this Trump rally but they are now keen on leaving their negative positions and turning bullish.”
The rally in US stocks, which saw the S&P 500 index climb almost 5 percent higher in the months following the elections in November began losing momentum earlier this year.
However, investors are restoring their faith and scrambling to buy sectors that they had neglected.
Typically, shares in the real estate sector are impacted negatively when bond yields climb. This time though, the shares have been rallying alongside rising bond yields in Europe and the U.S.
In a note last week, Jason Hunter, a JPMorgan technical analyst indicated that the rally in US stock is now in an acceleration phase, with many sectors benefitting from the rally.
In both the US and Europe, stock volatility has declined amid expectations that the Federal Reserve will hike interest rates should the US economy continue on its current trend.
President Trump’s promise to reform the tax regime in the next few weeks coupled with expectations of a rise in inflation have also helped to fuel the rally.
If Mr. Trumps goes through with his promise to reduce corporate taxes, there is a possibility that the largest banks in the US could see their annual profits rise by at least 14.
Banks are certainly set to benefit from tax reforms more than other industries given that they have usually have fewer deductions and these tax cuts could save lenders up to $12 billion yearly.
Mr. Trump has asserted that corporate taxes should be trimmed from a 35 percent rate to 15 percent.