March may have proved a little more volatile than recent months, however, the UK’s UK 100 is still expected to move into April 1.5% to the good. A very respectable performance given last week we were almost back to breakeven, having sold off from fresh record highs the week prior. This month has thus offered attractive trading opportunities in spades as well as demonstrating the resilience of the UK’s blue chips for both short-term traders and long-term investors alike.

Were you aware, for example, that this month 16% of the index rose by more than 5%? A handful of names did 10% or more, one even managing 15%, rallying for the whole month, seemingly immune to the geopolitical and central bank hopes and fears that drove the wider markets.

#Despite 50% of the index having risen by over 5% since the turn of the year (one of the best starts for global equities in 5 years) we still see demand from income hunters who are reassured by more than 20% of constituents offering yields of over 5%, implying dividend growth keeping pace with shares prices. The combination of dividend income and capital appreciation is highly appealing in an era of still artificially low rates, with low returns from bonds and cash interest almost non-existent.

We may well have pulled back from record highs posted earlier this month but we also remain tantalisingly and reassuringly close. The UK Index sits just 1.5% lower, as does its US peer the S&P500, while US Dow Jones has 2.2% recovery upside and the German DAX trades 2yr highs which are just 1% south of its all-time best. Many have been recently looking to call the top of the market (the reverse of a bull trying to call the bottom), wanting to profit from any big sell-off.

However, shear proximity to highs suggests continued confidence. Investors are refusing to panic about new Trump’s trouble in repealing Obamacare. Yes it showed divisions within his own Republican party, but markets no longer assume we will see similar resistance for the other, arguably more important, pro-growth policy pledges that got him elected.

Healthcare may have been more about allowing the winning Republicans to thumb their noses at losing Democrats. However, resistance in the lower house/house of representative looks more down to GOP factions wanting the right deal rather than just any old alternative to Obama’s legacy.

Repeal might have allowed money to saved and re-allocated for increased spending in areas such as Defence, for example, to keep things budget neutral. However, it is the other measures (infrastructure spending, banking deregulation, tax reform) that have much more potential to foster US economic growth to ensure continued recovery from the financial crisis, and inflation allowing the US Federal Reserve to keep normalising interest rates from their extreme lows.

Sentiment may have been dented this week when the Obamacare repeal bill was pulled late last Friday for lack of Congressional support. But markets have already moved on. If anything, this may even allow the Trump administration to move forward sooner than hoped with the other pro-growth policy goals, as it would appear that a healthcare success wasn’t necessarily a prerequisite for policy progress elsewhere.

Composure has returned already. In fact, there is even talk that Trump might have another go at the Healthcare bill next week. For all his outspoken and tweet-tastic outbursts, investors are clearly prepared to give the Donald many second chances as well as the benefit of the doubt that, while there are sure to be bumps on the road, his grand plan to make America great again will ultimately pay off, boosting US growth that spills over to benefit global growth and financial markets too.

One little bit of concrete progress to back up his election promises could be all markets need to get excited about the Trumpflation trade again, spurring the next leg higher. To fresh all-time highs.

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As always, enjoy your weekend.

Mike van Dulken, Head of Research, 31 Mar 2017