Beware of irrational trading sentiment

TRADERS and economists were at odds in their reactions to the United States Republican Party's planned tax cuts. Investors professed themselves upbeat on the prospect of a lower tax rate for businesses, which - so they reasoned - would boost earnings and yield more for shareholders. Meanwhile, analysts wagged their fingers at how the tax package would come with a ballooning deficit - more than US$1.4 trillion, according to the non-partisan Congressional Budget Office - and might prompt other nations to woo US firms with aggressive rate-slashing on their own shores.

The analysts were shouted down. Glee dominated on the trading floor.

Elsewhere around the world, markets were said to be raking it in on the back of "cues from Wall Street" - that hoary old chestnut. But at the eleventh hour - when a bill that was infamous for being both annotated by hand and voted on overnight approached the desk of US President Donald Trump - indices from Wall Street to Shenton Way felt slightly faint. Industry watchers promptly blamed a "buy the rumour, sell the fact" mindset.