The week in finance: 27 January 2017

US stock prices hit another record high

Stock prices in the US have jumped 15 per cent since Donald Trump’s election victory in early November and are at a record high. Investors are betting on less regulation, lower corporate taxes and a big government spending program giving corporate profits a boost (e.g. a construction firm getting a new contract to build public infrastructure).

This week also saw President Trump formally withdraw the US from the Trans Pacific Partnership, a massive free trade deal between Pacific Rim countries (free trade is generally thought to be good for an economy). Despite investors’ optimism, it’s not yet clear which of Trump’s policy proposals will come to fruition – and how they will ultimately impact the US (and global) economy.

What happened in Britain?

Telecom company BT Group (the owner of BT Sport) saw its share price plunge 20 per cent on Tuesday after it announced a large loss at its Italian subsidiary and said it would make much less than expected this year from its contracts with big corporations and the UK government.

Investors were already concerned by the UK government’s plans to force BT to make Openreach, its subsidiary that owns most of the UK’s internet infrastructure, a fully independent company (the government is concerned that it has too much in the industry, and thus could unfairly treat customers).

And finally…

Alphabet Inc., the parent company of Google, made less profit than expected in its most recent quarter. The company ramped up its spending on its new products, including a push into cloud computing. The higher costs dented its profit today, but the idea is that the investment will pay off in the future.

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