Markets continue their optimism for fiscal stimulus from President Joe Biden’s new government. The S&P 500 rose 1.39% to a new high yesterday – the best Inauguration Day rise in 36 years.
It may not hold. We call of the day is from Citi’s C,
report on investment themes for 2021, and the bank said there was a “high probability of financial turmoil” coming to markets.
Equity index valuations are at elevated levels, potential credit downgrades are threatening and there is the possibility of inflation surprises this year, Citi said.
According to the bank, financial valuations do not correspond to real measures such as the gross domestic product ‘by almost all measures’. It loads the gun for a turbulence trigger.
It could be inflation. The COVID-19 pandemic laid the foundation for inflation rates to be volatile in 2021. Although Citi said there was “little underlying support” for sustained inflation, the lack of pricing due to the effect of barriers and corresponding year-on-year base effects could potentially scare markets.
A wave of turmoil can also be offset by delaying central bank purchases. Forecasts indicate that the rate of purchases and net asset purchases will decline this year. Since net asset purchases are the highway between monetary policy and the real economy, Citi said a change in these patterns could surprise markets “even if central banks try to communicate in advance.”
According to the investment bank, any turmoil according to the investment bank is likely to hit the stock and credit markets, as these asset classes currently show volatility higher than recent norms.
What should investors do? Citi recommends buying the next dive.
The Investment Bank’s Global Bear Market Checklist registers 8/18 red flags after the most recent rally, which is the most marked since 2009. The US market has 9.5 red flags, while it is lower in Europe, with 5.
This indicates a fair amount of “foam” in markets – the more frothy, the less likely Citi is to buy the dip. But that’s still enough.
The buzz
Biden went to work on Wednesday and overturned some of former President Donald Trump’s signing policies. He signed 15 executive orders, including the lifting of the ban on immigration from majority Muslim countries, revoking the permit for the Keystone XL pipeline and the process of rejoining the Paris climate agreement.
Attention is now focused on introducing a $ 1.9 billion plan through Congress to help the pandemic-plagued economy, including sending $ 1,400 stimulus checks to Americans.
Online retailer Amazon AMZN,
offered to throw its weight behind the new government’s promise to increase the distribution of COVID-19 vaccines in the US, saying it could help Biden achieve its goal of reaching 100 million Americans in the next 100 days ent, to reach.
On the economic front, all attention is focused on the work reports released today. The initial claims for unemployment until January 14 are 900,000, less than the 935,000 expected and a decrease compared to 965,000 last week. There were about 9 million persistent unemployment claims on January 9th.
In December, the homes started with 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 list them, in line with a Trump-era policy.
Consumer products giant Unilever ULVR,
said it would ensure by 2030 that all workers in its large supply chain are paid a living wage by their employers. The multinational company is behind brands including Ben & Jerry’s, Hellmann’s, Q-Tips and Dove Soap.
The markets
It looks like a positive day ahead of yesterday’s big rally. Stock market term is slightly higher YM00,
ES00,
NQ00,
set on a soft but lively open with the Dow showing about 70 points. Asian markets NIK,
HSI,
SHCOMP,
greatly increased while the European market UKX,
DAX,
PX1,
continued their march. The pan-European Stoxx 600 SXXP,
is eight of the last 11 days higher.
The graph
Trump’s White House days are history, with the stock market performance he has now put forward for the books. Our chart of the day from Deutsche Bank DBK,
shows that Trump led the US through the second best S&P 500 performance since the Great Depression, on an annual basis. Bill Clinton, president by the dot-com bubble in the late 1990s, takes first place.
Random reading
Hell to pay: Suspected arson shakes a Church of Satan community.
A woman declared dead in 2017 is fighting to be declared alive.
Need to start starting early and being updated to the opening clock, but sign up here to have it delivered to your inbox once. The version by e-mail is sent in the Eastern direction at about 07:30.
Want more for the day ahead? Subscribe to The Barron’s Daily, an investor briefing, including exclusive comments from Barron’s and MarketWatch authors.