Insights

WuRevue Week Ending 01/08/2021

Top News:

01/04: Following recent market highs, stocks swooned as investors took profit ahead of ample political anxieties anticipated in the US (here, here).  A South African coronavirus variant with increased transmissibility is sparking concerns over whether existing vaccines will prove equally effective.

 

01/05: One gauge of US manufacturing revealed better than expected growth in December, supported by new orders, production, and employment.  The price of crude oil jumped in the wake of the announcement by OPEC+ to cut production.

 

01/06: Viewing the unprecedented takeover of the Capitol as irrelevant to earnings and economy, Wall Street focused instead on fiscal support from a more sympathetic Democratic ruling “trifecta,” now that its Senate control appears sealed.  An indicator of US private payrolls dropped unexpectedly in December.  Additional flashpoints in US-China relations arose after a Chinese security dragnet detained over 50 progressives in Hong Kong.

 

01/07: Recent market rally continued after the US Congress certified the Biden/Harris victory.  Meanwhile, weekly unemployment claims reaffirmed the unlikelihood of improvement until the pandemic subsides. Flip-flopping for a second time in less than a week, the NYSE is proceeding with the delisting of three Chinese telecoms, with Alibaba and Tencent also rumored to be targets.

 

01/08: December marked the first month in which US saw job losses since last April, with leisure and hospitality bearing the brunt of cuts.  Incoming Biden administration is reportedly considering an additional $3 trillion in fiscal stimulus in direct household payments and infrastructure upgrades, potentially accelerating inflationary pressures.  Initial research suggests the Pfizer-BioNTech vaccine appears effective against new coronavirus variants.

 

 

Heard on the Street:

“If we try to fine-tune a very modest inflation overshoot of only a tenth or two, we run a very large risk of failing to achieve our 2 percent averaging goal within any reasonable amount of time. For me, getting inflation moving up with momentum and delivering rates around 2-1/2 percent is important for achieving on our inflation objective in as timely a manner as possible.”

— Charles Evans, Chicago Fed President and FOMC voting member, in a speech on 01/04/2021

 

“Democrats picked up both Georgia Senate seats, paving the way for Biden to implement his agenda more broadly… We are going to have the largest stimulative event in the history of the planet in the second half of this year…and there’s all this pent-up demand.”

— Jonathan Golub, Credit Suisse equity strategist, as quoted by MarketWatch on 1/07/2021

 

 

Longer Game:

However tempting it may be to dismiss the events of Jan. 6 as a “beer belly putsch,” lasting damages have been inflicted upon the self-image and worldwide standing of the US.  One commentator from MIT believes the key to understanding those responsible is their disposition towards “right-wing authoritarianism,” which defies traditional demographic boundaries.

 

 

Bonus:

Spurred by loose monetary and fiscal policies, the US equity market has been on a upward channel since April.  While it may be unfashionable to hear from those less sanguine, it’s more important than ever to do so in order to maintain a balanced perspective and avoid the groupthink trap of excessive euphoria.