Insights

WuRevue Week Ending 1/29/2021

Top News:

01/25: Tough negotiations between the administration and Congress have begun on additional fiscal support.  A measure of German business confidence declined more than expected in January, due to heightened restrictions weighing on outlook.

 

01/26: Asian markets were spooked by speculation that China’s central bank may be shifting its monetary policy.  The IMF modestly raised its 2021 global GDP growth forecast to 5.5%, predicated on a vaccine-driven recovery.  Mirroring this forward-looking mentality, one gauge of US consumer confidence improved in January, albeit ever so slightly.  Meanwhile, UK’s latest unemployment rate rose to the highest level since 2016.

 

01/27: US indices tumbled to session lows, after the FOMC underscored the challenging road ahead, following its first policy meeting of 2021.  The administration is ramping up the vaccine rollout, along with a flurry of executive actions aimed at bolstering the nation’s Covid response. Despite slower growth in new orders, US manufacturing demonstrated continuing resiliency in December.  Consumer confidence in Europe’s largest economy declined in January due to its extended lockdowns.  Additionally, bond investors are closely monitoring EU’s reportedly forthcoming revision of member states’ 3% and 60% deficit and debt thresholds.

 

01/28: 4Q GDP growth in the US moderated to 4%, resulting in the worst single-year performance of -3.5% since 1945.  This fading momentum in recovery was also evident in another economic index that measures U.S. business cycles in December.  Though hardly a cause for celebration given the persistently high levels, the latest weekly unemployment claims report proved marginally better than expected.

 

01/29: Sustained volatile trading in a small batch of heavily shorted companies sparked concerns over a speculative bubble in the wider market. Concurrent with the weakening of US consumer spending in December, the core PCE index (the Fed’s preferred measure of inflation) rose at an unremarkable clip of 1.5%. 

 

 

Heard on the Street:

“There’s way too much leverage in the system, and we’re starting to see signs that this excess leverage is going to be unwound in a way that will create headwinds for the stock market and other risk assets for more than just a few days.”

— Matt Maley, chief market strategist at Miller Tabak, as quoted by CNBC on 01/28/2021

 

 

Longer Game:

While acknowledging that he was “thrilled” with Biden’s inauguration speech, Ray Dalio, who heads the world’s largest hedge fund, remains less than sanguine about bridging divides, noting, “Good words and spirit aren’t enough. People will have to agree on both how to grow the pie and how to divide it well. That will require revolutionary change.”

 

 

Bonus:

NIH’s Dr. Fauci provided a wide-ranging update on the current war against the coronavirus.  Meanwhile, one US biotech firm announced its late-stage vaccine candidate is effective against new coronavirus variants, while another pharma’s single-shot vaccine appeared less efficacious than hoped.  On the treatment front, encouraging trial results of two monoclonal antibody cocktails have also been reported (here, here).