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Following Trump's shock victory in the race for the White House
in November, U.S. stock markets have hit record highs on
expectations he would cut taxes and regulation.
But major U.S. stock indexes posted their largest daily drop
this year on Monday as a curb on immigration ordered by Trump
reminded investors that some of the U.S. president's promised
policies are not market-friendly.
The Dow Jones Industrial Average <.DJI> closed 0.6 percent lower
on Monday, its largest one-day percentage drop since October.
Recommended equity allocations were cut to a three-month low of
52.2 percent from 52.7 percent in December, the survey of 13
fund managers conducted from Jan. 17 to 30 showed.
Funds left allocations to bonds and property largely unchanged,
while a search for yield led to a slight increase in alternative
investments such as hedge funds and commodities.
Recommended cash allocations were cut to 3.9 percent from 4.3
percent in December.
Funds increased bets in favor of high-yield securities at the
expense of government and investment-grade bonds.
"The 'animal spirits' dynamic coming out of the Trump victory
continues to be flagged as a big tailwind for equities," wrote
Alan Gayle, director of asset allocation at RidgeWorth
Investments.
"But while confidence can be a powerful tailwind, it ultimately
must be validated by results. The early focus on ACA could delay
potential positives from tax reform and infrastructure
spending."
Since taking office, the president's focus has been on
immigration and weakening the Affordable Care Act, the health
insurance program also known as Obamacare.
Markets have priced in only a 4 percent chance the U.S. Federal
Reserve raises interest rates this week, its first meeting since
Trump took office on Jan. 20. All 106 economists in a Reuters
poll were unanimous in not expecting any hike.
"We
believe that Federal Reserve monetary policy will err on the
side of accommodation while potentially supportive fiscal and
regulatory proposals are discussed and possibly implemented by
the new Congress and Administration," Gayle said.
(Polling by Sarmista Sen and Purnita Deb; Editing by Catherine
Evans)
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