US stocks can make a new series of records

Major US indexes could make another run for records this week, as long as earnings reports from big banks such as JPMorgan Chase keep "Trump trades" alive.

The jobs market lost steam by one measure in March, with only 98,000 jobs added, roughly half the average additions during the recovery. But the unemployment rate of 4.5 per cent was the lowest in decades. Expectations of a rate hike moved higher in the wake of the report and the US dollar, whose gains were slimmed substantially in the last couple of weeks amid doubts about President Donald Trump's policies, put much of that weight back on.

The rapid military response from the US to the Syrian government's apparent use of sarin gas came as a surprise to all, given Mr Trump's opposition to the use of American forces in what he'd described as a civil war. The market reaction was muted however, with only moderate gains for gold futures where investors often take cover in times of war. That was partly because the administration described the bombing raid on the grounded planes that had carried the grisly weapons as a once-off.

But the attack may also have improved the chances of Mr Trump advancing his domestic agenda. For the first time in his presidency, Mr Trump's impulsive decision-making was widely applauded. He would not be the first US president whose sinking domestic ratings were turned around by bold foreign-policy moves. In Mr Trump's case, entering the fray in Syria also amounted to an act of aggression against Russia. That could quell whispers that Mr Trump's campaign was secretly supported by Russian President Vladimir Putin.

This week, banks such as JPMorgan, Citigroup and Bank of America will provide their view on Mr Trump's plans for the financial sector and the interest-rate outlook. Trump is a big proponent of financial deregulation and has already taken steps to ease the regulatory burden on financial institutions through executive orders.

Deregulation offers the potential benefit of freeing up more capital for financial institutions to lend, supporting loan growth, and can also reduce legal and compliance costs.

As long as there are no more shocks from the Syrian conflict, bank earnings or the French election, this week promises to be a good one for the US stock market.

Source: Bloomberg

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