What you need to know on the markets this week: Biden spending plans, bitcoin blues and a vye-dollar vye not loved with the first Fed meeting and a look at US Gross Domestic Product | Currency News Financial and Business News

US President Joe Biden's Twitter account is displayed on a phone screen
President Biden’s Twitter page. He wasted no time in disclosing his spending plans.

  • Joe Biden has taken the oath as the 46th president and wasted no time in unveiling his spending plans.
  • Stocks have reached record highs thanks to the prospect of a $ 1.9 trillion stimulus, but bitcoin has collapsed.
  • Investors will get a first look at US 4th quarter GDP and the Federal Reserve is meeting for the first time in 2021.
  • Please sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Here are the big themes we’re looking at in the coming week, along with a chart of Big Tech performance around the world.

Joe Biden is taking his job with a $ 1.9-trillion bang

With swearing in on Wednesday, Biden becomes the 46th president of the United States and has not delayed his agenda. Its proposed $ 1.9 trillion stimulus package was enough to condition more all-time highs from the global equity markets, with entries in the S&P 500, pre-Japan MSCI Asia index and Europe’s STOXX 600 near where ‘ It was when the pandemic struck last year. , despite an alarming increase in COVID-19 outbreaks and new locks.

Janet Yellen, Biden’s choice for treasury secretary, urges the incoming government to spend big and worry about all the debt that will inevitably create later.

How much the final package is, how that profit will be distributed, and what immediate impact that will have on growth is all to be seen. It is enough, however, for the stock market to be looking past inconvenient economic realities as nearly one million Americans are still filing for unemployment benefits a week. Several other indicators have shown resilience to the recovery, with housing starting to hit 14-year highs and manufacturing activity in the mid-Atlantic region rising to three-month highs.

How did the US 2020 economy end?

This coming week, the markets will get a first look at U.S. economic growth in the turbulent fourth quarter of 2020. After contracting 31% higher than ever in the second quarter, when coronavirus locksmiths were on the receiving end, ‘ The economy has largely bounced. according to. At the last count, it was still 3.5% less than it was before the pandemic struck. Growth of 4.4% is forecast.

The data will not reflect the impact of the $ 892 billion aid package agreed in late December after months of torture stand-up in Washington DC. But the prospect of Biden’s $ 1.9 trillion bazooka has given Wall Street’s big banks a cause of optimism. Goldman Sachs raised its forecast for 2021 growth to 6.6% from 6.4% previously, while JPMorgan’s chief global strategist, David Kelly, thinks nominal GDP could expand 11.4% year-on-year by the end of December.

“Extended, extended and improved unemployment benefits through September should significantly reduce poverty until the pandemic ends,” said Kelly.

Bitcoin gets the blues

It was a bad week for bitcoin bulls last week. The price fell by 12%, marking its biggest fall since the end of August. It’s still up almost 270% in the last 12 months, so it’s not all disgrace and disrespect. But the chorus of voices of those calling for greater scrutiny of cryptocurrencies in general is growing. This past week, Yellen said bitcoin and its ilk are used “primarily” in illegal financing and should be “curtailed.”

“Cryptocurrencies are a particular concern. I think many are used – at least in a transaction sense – primarily for illegal financing,” he said.

Bitcoin is currently the most crowded trade, according to a recent Bank of America asset management survey, and feels the most likely direction for the price is lower in the coming week.

“I expect the need to see a further downside before we see significant bullish momentum build, which would then be a good time for new buyers to enter the market and push prices even higher,” the DailyFX analyst said, Daniela Sabin Hathorn.

Ditch the dollar and buy everything (and anything)

With another nearly $ 2 trillion stimulus coming that will boost growth and help keep lending rates low, the dollar can’t cut a break. Currency managers sit atop their largest short position in nearly a decade and even with the 10-year Treasury yield backlog exceeding 1.1%, Biden-based risk appetite and euphoria run high high and investors are back to the “buy” everything “trade, largely at the expense of the dollar.

Junk bond yields have reached lows, a basket of unprofitable technology companies has become parabolic and Italy’s sovereign debt – where the government has just narrowly avoided melting down – is more expensive than the US debt. The dollar index is at its highest in six weeks, but two weeks ago, it was at its lowest since early 2018 and bears are currently managing soundly.

Can the Fed tame the tantrum?

In the hope of a faster economic recovery, Treasury yields rise which for many reminds of 2013’s “Taper Taper” – the sharp uptick in yields that followed after the Fed indicated it would begin to wind down ended its asset-buying program Started with the great financial crisis of 2008/2009.

The Fed’s list of officials is blackout before the meeting until Wednesday’s first monetary policy meeting of the year, followed by a press conference hosted by chairman Jerome Powell. But a host of central bankers, including Fed board members Lael Brainard and Richard Clarida, have indicated that the Fed is not in a hurry to wind down its current program, where it buys $ 120 billion a month in Treasuries and securities with mortgage support.

“The market’s expectation of tapping the Fed rose sharply in early 2021, but we believe that a lower pace of asset purchases could still be a year away, depending on the evolution of US growth and inflation. This is likely to mean no announcement taper before 2H at the earliest., “Bank of America rate strategists Ben Randol and Ralph Axel Bofa said in a note last week.

Chart of the Week – Big Tech is more than FAANGs

Big Tech is all rabies. Apples, Amazons, Teslas, and Microsofts are among the best performing stocks, not only in 2020, but over the past few years. However, valuations are high and the FAANGs are not the only way for investors to sink their teeth into this sector. Asia’s tech giants perform just as strongly and, with valuations at nearly half of their New York-listed counterparts, are far less expensive.

Big Tech index performance since January 2018 reappeared to 0
Big Tech index performance since January 2018 reappeared to 0

Next week’s events:

Earnings

January 26 Microsoft, J&J, Visa, LVMH, NextEra, Starbucks, 3M

January 27 Apple, Tesla, Facebook, Boeing

Jan. 28 McDonald’s

January 29 Caterpillars

Economic data

January 26 UK employment

January 27 Federal Reserve rate decision and press conference

January 28 Euro zone consumer confidence; US GDP – Q4 higher

January 29 US core PCE

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