Markets remain optimistic about the fiscal stimulus for President Joe Biden’s new administration. The S&P 500 rose 1.39% yesterday to a new high – the best Inauguration Day increase in 36 years.
It may not last. Our call of the day is from Citi C,
report on investment topics for 2021, and the bank said that there is “a significant probability of financial turmoil” reaching the markets.
Stock index ratings are at high levels, potential credit downgrades are approaching and there is the possibility of inflation surprises this year, Citi said, supporting strategists’ projections.
Financial assessments are not consistent with measures on the real side, such as gross domestic product “by virtually all metrics,” according to the bank. This charges the gun to a turbulence trigger.
It may be inflation. The COVID-19 pandemic laid the groundwork for inflation rates to be volatile in 2021. Although Citi said there is “little underlying support” for sustained inflation, the lack of prices due to the blocking effect and corresponding base effects year after year it could scare the markets.
A wave of turbulence may also be triggered by the slowdown in central bank purchases. Projections suggest that both the pace of purchases and purchases of liquid assets are expected to slow down this year. Given the fact that purchases of liquid assets are the main path between monetary policy and the real economy, Citi said that a change in these patterns could surprise markets “no matter how much central banks try to communicate in advance”.
Any turbulence is likely to hit the stock and credit markets, according to the investment bank, because these asset classes are currently exhibiting greater volatility than recent norms.
So, what should investors do? Citi recommends buying the next dive.
The investment bank’s Global Bear Market Checklist is registering 8/18 red flags after the last hike, which is the biggest mark since 2009. The US market has 9.5 red flags, while it is lowest in Europe, with 5.
This indicates a good amount of “foam” in the markets – the more foamy, the less inclined the Citi model to buy the dive. But it is still enough.
The buzz
Biden started work on Wednesday, reversing some of former President Donald Trump’s signature policies. He signed 15 executive orders, which include revoking the immigration ban from Muslim-majority countries, revoking the license for the Keystone XL pipeline and starting the process of joining the Paris climate agreement.
Attention now turns to the launch of a $ 1.9 trillion plan in Congress to help the economy devastated by the pandemic, including sending $ 1,400 stimulus checks to Americans.
Amazon AMZN online retailer,
offered to support the new government’s pledge to increase the distribution of COVID-19 vaccines in the U.S., saying it could help Biden reach her goal of vaccinating 100 million Americans in the next 100 days.
On the economic front, all eyes are on the job reports released today. Initial claims for unemployment benefits until January 14 reached 900,000, less than the expected 935,000 and a decline from last week’s surprise of 965,000. There were about 5 million ongoing claims for unemployment insurance as of 9 January.
Housing construction figures in December reached 1.7 million, above expectations.
Three Chinese telecommunications giants – China Telecom 728,
China Mobile 941,
and China Unicom 762,
– asked the New York Stock Exchange to review its decision to remove them from the list according to a Trump era policy.
Consumer product giant Unilever ULVR,
He said that by 2030 it will ensure that all workers in its vast supply chain receive a minimum wage from their employers. The multinational is behind brands such as Ben & Jerry’s, Hellmann’s, Q-Tips and Dove soaps.
The markets
It looks like a positive day after yesterday’s big rise. Stock market futures are slightly higher at YM00,
ES00,
NQ00,
set for a smooth but floating opening, with the Dow pointing upwards around 70 points. Asian NIK markets,
HSI,
SHCOMP,
recovered widely while the European UKX markets,
DAX,
PX1,
continued its advance. The pan-European Stoxx 600 SXXP,
increased eight out of the last 11 days.
The graph
Trump’s days at the White House are history, with the stock market performance he now chaired for books. Our Deutsche Bank DBK day chart,
shows that Trump led the US with the second best performance of the S&P 500 since the Great Depression, in annualized terms. Bill Clinton, president through the dot-com bubble in the late 1990s, ranks first.
Random readings
Hell to pay: suspected arson shakes a community of the Church of Satan.
A woman declared dead in 2017 is struggling to be declared alive.
What you need to know starts early and is updated until the opening bell, but sign here so that it will be delivered once to your email box. The emailed version will be sent around 7:30 am Eastern.
Want more for the next day? Sign up for The Barron’s Daily, a morning briefing for investors, including exclusive comments from Barron’s and MarketWatch writers.