HAMISH MCRAE: a triumph of technical stocks compared to the Trump economy

About the attack: American financial community does not say that the American economy dominates the rest of the world in an outburst of Trumpian triumphalism

If you've been frustrated by the three new iPhones launched last week, or indeed the Apple watch – even though they look like a blow of astonishment – you should be surprised by Apple's stock price. It is within a whisker of its all-time high, reached earlier this month, the company values ​​at $ 1.09 trillion. If you had bought your shares ten years ago, you would be about ten times in dollars.

Be amazed by the value the markets attach to high-tech America, while Amazon struck $ 1 trillion a few days ago before falling back. And, of course, there are the other giants, Alphabet (parent company of Google) worth $ 820 billion, and venerable Microsoft, now worth $ 869 billion. The bulls on Wall Street are talking about five separate trillion dollar companies by the end of the year.

Who knows? What we do know is that it is the high-tech companies that have led to the divergence of US stock prices from those of the rest of the world, including the UK. The S & P 500 index peaked at the end of August and is now a few points lower. On the other hand, the FTSE 100 in May is about 8 percent of its highest point, the German DAX with the same amount of its highest level, also in May, and the French CAC index about 5 percent also of its highest point.

About the attack: American financial community does not say that the American economy dominates the rest of the world in an outburst of Trumpian triumphalism

About the attack: American financial community does not say that the American economy dominates the rest of the world in an outburst of Trumpian triumphalism

Were it not for the technical giants, American shares would also be lost; they would have done about the same as the British and European indices.

In short, the American financial community does not say that the American economy dominates the rest of the world in an outburst of Trumpian triumphalism. On the contrary, it is said that the US has something special in its high-tech sector, a dominance that will last for some time. The big question is how long this incredible run will last – and will it end with a whine or a bang?

You have to differentiate between the commercial dominance of these companies and the market's assessment of that dominance, but for advice Robert Shiller may be the best person to go to.

He is a professor of economics at Yale, Nobel laureate and bestselling author, particularly Irrational exuberance, published in 2000, who warned of the excesses of the dotcom boom.

He has also given his name to the Case-Shiller index of US house prices and the CAPE Shiller stock price index, which investors see as an important way to attribute value to stocks.

In an interview with Bloomberg, Shiller has just acknowledged that shares are expensive but can become even more expensive. He says that although the rising market has something to do with the business-oriented mantra of deregulation and lower taxes of President Trump, it goes beyond the rational, logical effect and has something to do with our animal spirits.

& # 39; Animal spirits & # 39; was the expression that John Maynard Keynes, in his famous work from 1936, The General Of Theory of Interest, Employment and Money, came up with to explain why people sometimes acted with spontaneous optimism rather than mathematical expectations & # 39; – in other words, take risks that were not justified by the available information.

So maybe it's the Trump effect.

There are two indications in the short term for the direction of the US exchange rates – each, rather useless, pointing in a different direction.

One is that his CAPE-Shiller index (CAPE stands for cyclically adjusted price gain) is now in the low 30s, but in 2000 it came to 45. This suggests that stock prices are not as overvalued as in the dotcom crash, so feasibly further on. The other is that Shiller says he currently does not contribute to his own US equity portfolio.

You know Harry Truman's joke about having an economist with one hand: "All my economists say: & # 39; On the one hand … & # 39; but then & # 39; On the other … & # 39;. & # 39;

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The ultimate exercise in animal spirits in the last 12 months was the hype of the crypto-currency and what looks like a bust.

They are on average about 80 percent lower than their peak.

The question now is whether they are really useful or whether Agustin Carstens, head of the Bank for International Settlements in Basel, describes them painfully: "A combination of a bubble, a Ponzi scheme and an environmental disaster."

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