The Telegraph is running a countdown of the time left before outgoing president Barack Obama leaves the White House. As at today, Friday 13th January at 3 pm, this was 6 days 15 hours away.

Naturally, his departure has prompted many reviews of his presidency from a political and financial perspective. It follows that many have  also taken a look at how the US stock market has performed during his two terms.

obamaObama came to power  when markets where in the throes of one of the worst financial crises since the Great Depression.  Stockmarkets had already suffered massively post the collapse of Lehman Brothers by the time Obama was elected in November 2008. After his inauguration in January 2009 the Dow Jones sank  a frightening 20% from mid- January to early March. All major markets including the US, bottomed in March 2009 and have posted spectacular gains since.

To flesh this out in figures, the Dow Jones, the index of the top 30 US companies, has risen by more than 140%  since Obama’s inauguration. From the March 2009 to date, the figure is an even more jaw dropping  210%

Of course, a number of factors  played a role in this, and not all are attributable to Obama.  One of his achievements was the $787 billion economic  stimulus package that Congress had approved  just a month after he became president and helped get the economy and the market get back on track. On the other hand, the much maligned bank bailout, put into place in the final months of George W Bush’s presidency , also went a long way towards stabilising large banks. The Federal Reserve  also played an important role  by implementing   emergency programs in 2008/9  while maintaining historically low rates throughout  Obama’s presidency.

The spectacular rise in the share  price  of some of the technology companies which are Dow Jones components is yet another factor  to explain the phenomenal rise in Dow Jones. Apple shares are a staggering 415% higher since Obama took office while Amazon has catapulted even more than double this figure – up an incredible 900%

Some stock market commentators have been quick to extrapolate figures  and suggest that if the market goes up at the same rate (140%) with  Trump being a two term president (now that is one major assumption!) the Dow Jones would hit 47,800 at the end of his second term.  This of course sounds almost removed from reality but on the other hand, the Dow did surpass what was thought to be an impossible landmark of 10,000 under Clinton and the even more improbable 15,000 under Obama and is now within a hair’s breadth of 20,000.

While looking at what may happen  8 years from now sounds too “Space 1999”, maybe we can look at some expectations for this year.

In a note to clients this week, Goldman Sachs identified three major items that will impact US equities this year – and they all hinge on the impact of Trump’s policies. These are 1)  tax reforms,  2) the strength of the dollar and  3) the pace of wage gains.

Goldman believe that if  Trump’s promises on tax reforms are implemented and corporate tax rates go down from 35% to 25%, profits on large cap companies should be boosted by 8%. They are also confident that the rally in the US Dollar will continue if  Trump can deliver on infrastructure spending and cutting back on  regulation. They are therefore more bullish on stocks that have a high percentage of their sales concentrated in the US to avoid exchange rate risk.

However, analysts at Goldman Sachs are of the opinion that wage growth, while naturally excellent news to job seekers and workers alike, could hurt companies with high marginal labour costs. Wages in the US are now showing their fastest gains since the last recession ended. Fast food and retail stores could see earnings clipped as costs rise and in their view, should be avoided.

Of course, opinions and predictions are based on information available, coupled with analysis and interpretation of data. If ever a reminder was needed about this – and  that sometimes they turn out to be horribly wrong  –   we saw it this morning when the Wall Street Journal reported  that the billionaire hedge fund manager George Soros lost nearly $1 billion as the market rallied after Trump’s victory.  Soros, an avid Democrat supporter, had become increasingly cautious about the market before the election and became bearish after Trump’s victory.  He believed  the market would collapse, whereas the Dow Jones rallied by more than 9% since Trump’s victory.

This would certainly go down as an expensive case of “putting your money where your mouth is”.

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Local Market:  MSE Index starts 2017 on a positive note

Equity turnover for the second week of January came in at just over €1.4 million,  an increase of 62.8 % from the previous week’s €860,000.

Seventeen of the twenty-three listed equities were active, of which 8 gained, 5 lost ground and 4 closed unchanged.  The MSE index continued its positive run rising for the 7th consecutive week up 1% to close at 4,690.277

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The positives included Simonds Farsons Cisk plc (SFC), Medserv plc (MDS)  Bank of Valletta plc (BOV), Medserv plc (MDS) HSBC Bank Malta plc (HSB),Lombard Bank plc (LOM), Malta International Airport plc (MIA), GO plc (GO), and Malita plc (MLT). 

SFC, was the top performer climbing 3.57% to close at an all-time high of €7.25. Turnover was fairly restrained with just 1,500 shares trading for a value of €10,675.

This was followed by MDS, up 3.11% at €1.66. Here again turnover was poor, with a mere 250 shares changing hands for the value of €415.

BOV, ranked third place, with a 2.48% gain.  The equity traded to reflect the price adjustment post the 1:13 bonus issue to close today at €2.15. Turnover was a more respectable  300,000 shares for a value of just under €670,000.

The rest of the Banking sector also enjoyed a positive week, as HSBC, advanced 1.54% to a multi year high of  €1.98, while LOM was up by 1.3% to €2.33

MIA registered an increase of 1.23% over the previous week, closing at €4.10, on a turnover of 34,550 shares for the value of €141,000. In a Company announcement issued this week, MIA confirmed further positive results for year ending 2016. During the past year, the Company has reached an important 5 million passenger milestone, which exceeded expectations. Traffic grew by 10% over the previous year on the back of a 4.5% growth in Aircraft movements and a 7.6% increase in seat capacity.

Malta Properties Company plc (MPC) headed the list of equities closing in negative territory, followed by Plaza Centres plc, (PZC)  RS2 Software plc, (RS2) Maltapost plc (MPC) and Tigne Mall plc. (TML)

MPC gave up 5.88% on a turnover of just over 23,000 shares for a value of €13,000 closing at  €0.56c,  incredibly the same price it closed at on 12thJanuary last year.  Next in line was  Plaza Centres plc (PZC) declining  1.85% to €1.06 on thin volume of 2,500 shares for a value of €2,650.

RS2 Software plc (RS2) fell back  1.52% to €1.81 as 23,650 shares traded for a value of just under €43,000.

Trading in the Corporate debt market, stood at just over €1.25 million across 127 deals. Trading was spread over various issues, with the most active being 6.25% International Hotel Investments plc 2017-2020 which closed  at €100 accounting for 18% of the value.  The 4% IHI 2026 which closed at €101.70 was also active and represented 15.9% of the week’s turnover.

In a Company announcement HSBC Bank Malta plc, announced it will be redeeming the 4.6% HSBC Bank Malta plc 2017  on 1st of February at par.

Local Government Bonds

Trading in the  Local Government Stocks was fairly muted  with turnover of just under  €5 million spread over 217 trades.

The two most active bonds were 2.5% MGS 2036  which closed at €105.75,  while the 2.4% MGS 2021 closed at €101.59.

Last week the  Treasury gave details of the 2017 Indicative Calendar for MGS issues. The amount of issuance for the Financial Year 2017, has been set to a maximum of €600 million. The Treasury intends to launch 4 to 5 issues with the first MGS issue expected next month in February.

The issuance of the Malta Government savings Bond, is expected in the second half of the year.