With Donald Trump getting elected to the White House, and republicans securing a majority in the Senate and in the House of Representatives, the United States’ stock market has lower risks to the downside than their European counterparts. Mr. Trump’s agenda likely to lead to an increased government spending, especially on the infrastructures of the country, it would also unleash the potential of US energy reserves and would lead to the reduction of corporate taxes, along with the payroll taxes. In addition to that, Mr. Trump said he would reduce the taxes to as low as 10 percent on the dollars as a one-time opportunity to bring back the earnings back to the United States.
These factors should continue to provide supports to the American equity indices, which already reached a new record high yesterday. On the other hand, challenges are direr in the European continent. After the Britons voted in favor of exiting the European Union, the mere existence of the four-decade-old political projects is in question. The continent is being ravaged by migrants, rupturing the very social structure that has existed for hundreds of years. In terms of recovery, the European continent has been lagging behind the North American counterpart and the European Central Bank has been very late to unleash their monetary easing compared to the Federal Reserve in the United States.
With such contrasting outlook, we recommend buying S&P 500 at the current rate of 2200 and at dips, while selling the European blue chip index, Eurostxx50 at the current level of 3060 and at rallies up to 3230. This call will reap the most of the benefits in the longer run (more than 6 months).
