NEW US ADMINISTRATION—NEW BEGINNING
posted January 23, 2021
WuRevue Week Ending 1/22/2021
Top News:
01/18: Marking the first year in which China’s GDP expanded beyond 100 trillion yuan (US$15.4 trillion), the world’s second largest economy eked out a 2.3% growth in 2020, in stark contrast to other major economies.
01/19: Treasury Secretary nominee Yellen championed Biden’s fiscal stimulus plan and her commitment to a “market-determined” US greenback, in lieu of a strong dollar, at her confirmation hearing. The IEA lowered its 2021 daily oil demand as fresh lockdowns are expected to weigh on consumption.
01/20: Each of the major US indices closed at record highs, following Biden’s inauguration as the 46th president. The new administration is slated to issue executive actions on a wide spectrum of issues, ranging from pandemic relief, to immigration, to climate change. In a study yet to be peer-reviewed, the Pfizer/BioNTech vaccine was found likely to be effective against the more transmissible UK variant, even as questions linger regarding efficacy against some mutations. UK inflation remained a distant concern, though it registered a higher jump in December.
01/21: The administration released its pandemic action plan, including invoking the Defense Production Act. On the data front, the latest weekly jobless claims saw slight improvement; additionally, December housing starts soared at the quickest pace since 2006. On the Continent, the ECB left its accommodative policy and bond-buying program unchanged. In Asia, investors cheered Japan’s export sector, which grew for the first time in two years in December. Meanwhile, Japan’s central bank raised its annual GDP growth forecast modestly to 3.9%, while standing pat on its monetary policy, similar to other major global peers.
01/22: Heightened virus worries worldwide (here, here) prompted some profit-taking, following recent market highs. Compounding investor worries were data that showed economic conditions in the Eurozone worsened in January, prompting some chatter of a double-dip recession. In contrast, the latest existing home sales report confirmed US housing remained a bright spot.
Heard on the Street:
“Right now the bond market is starting to say we’re going to start seeing rising inflation, we’re going to have a more robust economy in six to 12 months. And if the forward curve of the bond market is correct, one could expect in nine months or 12 months at the very least, the Federal Reserve and other central banks starting to re-evaluate their monetary policy.”
— Larry Fink, CEO of BlackRock, as quoted by MarketWatch on 01/19/2021
Longer Game:
Is China’s renminbi poised to overtake the US greenback as the world’s reserve currency? Not so fast, said two scholars, who believe the dollar’s resilience can be attributed to “all of the intangible qualities that underpin investor confidence – not least a strong banking system backed by a reliable sovereign.”
Bonus:
As of mid-January, a solid majority of institutional investors believed some financial markets, including bitcoin and U.S. tech shares, are in bubble territory, according to a Deutsche Bank survey of 627 market professionals. Moreover, margin debt—the amount of leverage investors use to speculate—reached a historical high of $778 billion at year-end.