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Risk-off after Trump, pharma murdered

Risk-off after Trump presser rant

Far from being the catalyst for the next leg higher in the ‘Trump rally’, The Donald’s press conference seems to have called a temporary top. The publishing of the unsubstantiated intelligence dossier understandably rattled the President-elect and probably shifted the emphasis of the presser. Markets were waiting for “pro-growth” Trump and they got “fake news” Trump. Stocks markets were mostly lower while traditional havens like gold and the Japanese yen rose in response.

 All is not lost though. Not talking about fiscal stimulus on this occasion, doesn’t mean it’s cancelled. We view the sell-off as direct response to the specific comments targeting defence and pharmaceutical companies, rather than a general loss of confidence in the pro-growth agenda. If one can look through Trump’s bluster, high levels of fiscal spending, given America’s high debt levels, would be much more sustainable if the government can broker better deals in areas such as healthcare and defence.


Pharma stocks get murdered

The sentence “They’re getting away with murder” was all it took to see healthcare stocks in the US then Europe plummet. Donald Trump’s views on the pharmaceutical industry were thought to be more tempered than Hillary Clinton’s. The focus on the industry during the presser came out of left-field.

 A couple of high profile price gauging cases meant the momentum had already been building for a crackdown on high drug prices. If the rhetoric follows through to action, Donald Trump has just made the pharmaceutical industry un-investable. At least from a US standpoint, biotech led the last bull market so a rule of thumb is that it was never going to lead the ‘Trump rally’, should it continue.

 European-listed drug makers weren’t saved the pain. The likes of Shire, Hikma and AstraZeneca in the UK as well as Bayer in Germany all dropped in sympathy with industry peers in the US. The healthcare companies in Europe are typically global in nature and quite interconnected with the US so Trump’s comments bodes ill for the sector.


A retail earnings onslaught

An onslaught of Christmas updates from top UK retailers, almost all of which surprised to the upside shielded UK stocks from a generally risk-off tone following Donald Trump’s first press conference. M&S, John Lewis, Tesco, Debenhams, JD Sports, Supergroup, ABF and AO World were amongst those reporting.