Options Signal Pragmatism May Trump 'America First'

Although President Donald Trump’s first 100 days in office have been deemed chaotic and unproductive by many, the options market has been consistent in its positive outlook for growth and equities. Other than for Japan, equity options markets are signaling more upside-to-downside potential in coming months, not only for Europe and emerging markets, but also for in the U.S., despite contradictory policy statements by the administration.

Conflicting pronouncements have led to negative press, sentiment shifts and increased volatility, but the options market, like any efficient market, has not been swayed by the noise. Almost all S&P 500 sectors are telling the same optimistic story. Apart from geopolitical tensions, which are outside Trump’s control, the options market favors growth assets globally. It is pointing to larger expected tail gains versus tail losses for both emerging- and developed-market equities.