LIVE MARKETS-Making Wall Street great again

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MAKING WALL STREET GREAT AGAIN

The "Sell America" trade is losing traction among investors and while the dollar is still struggling, Wall Street has finally raised its head, clocking record closing highs and capping its best quarter in more than a year.

For Kairos strategist Alessandro Fugnoli, U.S. stocks are regaining their allure thanks to the prospect of significantly looser monetary policy, just as a stronger euro is tempting Americans to take some profit on their European exposure.

"Of the flight from U.S. assets seen in recent months, the only thing that persists - and likely will for some time - is the exodus from the dollar. The flight from the American stock market has halted," he writes in his latest weekly comment.

Fugnoli notes that while U.S. President Donald Trump has abandoned plans to cut spending and is keeping the elevated budget deficits of his predecessor, the days of Fed Chair Jerome Powell's moderately restrictive policy are numbered.

Chris Waller, a potential candidate to replace Powell, is ready to cut rates 6-7 times by the end of 2026, he notes.

On top of that, the upcoming reform of bank capital and leverage rules could offer an extra boost, he adds, essentially providing a form of quantitative easing that bypasses both public criticism and the Fed's direct involvement.

"This is essentially a 'counter-Basel' reform that boosts bank leverage, allowing them to buy more Treasuries and extend more credit to the private sector".

To conclude, the strategist expects the structural trend of diversification toward the rest of the world to continue, but if America's Big Tech can sustain its growth and innovation, Wall Street will remain highly competitive against its peers.

(Danilo Masoni)

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