Latest stockmarket rally won’t last unless Trump delivers on promises

The Trump administration needs to deliver on a number of its campaign promises if the rally in the US stockmarkets — which, in turn, can boost European markets, including the Iseq — is to last. This month marks the 10th anniversary of the beginning of the global financial crisis that set off the Great Recession.

What the then-Federal Reserve Chairman Ben Bernanke had characterised as a mere “$50bn problem” [€42bn] morphed into a plunge in equity values with investors losing trillions of dollars and a recession that caused US unemployment to peak at 10% in October 2009. What have we learnt a decade later? We found that as the Fed increased its holdings of bonds to $4.5tn — more than five times the level at the onset of the financial crisis — the additional liquidity boosted the financial markets to new heights.

The Standard & Poor’s 500 Index, which bottomed out at an intraday low of 667 in March 2009, now trades at about 2,445. The 10-year US Treasury yield, which some analysts had repeatedly predicted would surge to 4%, is still well below the 2.5% mark. Equity multiples have risen with stock prices. For example, the S&P 500, which traded in November 2008 at just 11 times its trailing 12-month earnings, now trades at about 21 times.