NEW YORK – A rally in major world stock markets stalled on Thursday as investors reassessed positions after Tuesday’s U.S. presidential election, while U.S. bond yields continued to climb on fears of a revival in inflation resulting from potential expansionary fiscal policy under President-elect Donald Trump.
Investors have quickly shifted to a focus on Trump’s priorities, including tax cuts, an increase in defense and infrastructure spending, along with bank deregulation.
Stocks in Europe and the U.S. reversed course and turned negative, with utilities down more than 4 percent in Europe. Wall Street was pulled lower by a drop in the technology sector, which was on track for its biggest decline since June 24.
“In a higher rate environment, growth stock valuations aren’t what they were in a lower rate environment, that’s just plain and simple,” said Stephen Massocca, chief investment officer, Wedbush Equity Management LLC in San Francisco.
Banking shares in the U.S. continued to rally and were up more than 2 percent on the session, and more than 9 percent over the past four sessions.
Stocks on Wall Street had rallied on Wednesday following Trump’s stunning win, with companies expected to benefit from his reflationary policies seeing the biggest climb, while bond proxy sectors like utilities and real estate slumped.
“I would start looking to put some money to work in some of these names, especially the ones with nine, ten percent dividend yields,” said Massocca.