Markets in Perspective - A Look at the New Presidency
By our colleague, Nell Sloane:
Stock bulls appear to be back in charge with major indexes sitting at new record levels.
Wall Street seems to think a majority of the chaos in Washington is behind us and a wave of virus vaccines and fresh economic stimulus is right around the corner.
Not even three weeks into the year and already the Russell 2000 is up nearly +10%, the Nasdaq is up almost +5%, and the S&P 500 is up nearly +3%.
There is a sense of relief that the changing of the guard in Washington went off without a hitch yesterday and investors can now remove that wild-card from the deck.
Attentions are now focused on the new policies coming from the Biden Administration and how that agenda might steer different sectors of the economy.
Straight away it's obvious that the new administration will be more friendly toward clean energy and climate change mitigation, with President Biden signing an executive order yesterday to rejoin the Paris Climate Accord and reversing the permit for the Keystone XL Pipeline.
Beating back the Covid-19 pandemic seems to be at the top of everyone's priority lists, investors and the new administration alike. There are no expectations that President Biden will implement any shutdowns at the Federal level, instead keeping those decisions with state and local authorities.
Most investors will be zeroed in on how the coronavirus vaccination campaign is progressing. Currently, it is not clear what specific new plans the administration has for boosting vaccine production but there has been some talk about utilizing the Defense Production Act to ramp up output.
I've also heard some talk of the military getting more heavily involved with the distribution. I've even heard that Uber and Amazon contacted Washington about using their distribution channels to help expedite the process.
There is obviously a real urgency to achieve widespread vaccination as new variants continue to pop up as the virus spreads.
Scientists said yesterday that a variant identified in South Africa isn't reacting the same with antibody treatments and may reduce the efficacy of current vaccines. The next vaccine candidates that are expected to seek U.S. approval are AstraZeneca/OxfordUniversity, Johnson & Johnson, and Sanofi/GlaxoSmithKline.
It sounds like AstraZeneca could file any day now. Compared to vaccines being distributed in the U.S. from Pfizer and Moderna, AstraZeneca's candidate is easier to administer and distribute. It can also be stored at regular refrigerator temperatures (35 to 46 degrees), something that would greatly expand the type of facilities and personnel that could distribute shots.
As I've mentioned before, the real "game-changer" could be Johnson & Johnson's vaccine as it is expected to only require a single dose. The company is expected to begin the approval process in the U.S. in the next couple of weeks.
Investors are also keeping an eye on Congress where lawmakers need to tackle a proposed $1.9 trillion pandemic relief package. Economic data today includes Housing Starts & Permits, the Philadelphia Fed Manufacturing Index, and Weekly Jobless Claims. Earnings will continue to gain the market's attention with big names like Intel, Bakers Hughes, CSX, IBM, The Travelers Companies, and Union Pacific all reporting. Keep in mind, several big names like Goldman Sachs, JPMorgan, and Morgan Stanely all had big beats on their numbers but the stock prices tumbled.
FAANG Fabulous: Google and Netflix rallied to all-time new highs yesterday. Apple and Facebook have seen some recent strength and both will report earnings next Wednesday, January 27th. Amazon and Google report earnings the following Tuesday, February 2nd (Ground Hogs Day)
Iranian Sanctions Relief Could Strain OPEC+ Ties: A return of Iranian oil to the market if new US President Joe Biden resurrects the nuclear deal could destabilize crude prices and undermine the OPEC+ alliance, experts said at the Atlantic Council Global Energy Forum on Jan. 20. OPEC, Russia and several other allies have instituted deep production cuts to support prices through the coronavirus crisis. But those gains could be wiped out by an increase of up to 1 million b/d of Iranian crude exports this year if sanctions relief is granted, said Carlos Pascual, who was the U.S. State Department's top energy diplomat under former President Barack Obama and played a key role in negotiating the nuclear deal. Iran's crude production has plunged, from a 10-year peak of 3.83 million b/d at the time of the U.S.' withdrawal from the deal to about 2 million b/d in 2020, according to S&P Global Platts estimates. Biden's team has indicated it would seek to reinstate the agreement – known as the Joint Comprehensive Plan of Action – as soon as practical, though this will depend on how open Iranian officials are to a renegotiated deal Source S&P Global
BlackRock Set to Enter Bitcoin Market: BlackRock, which manages some $8.7 trillion, is set to dip its considerably massive toes into the world of cryptoassets, according to public filings and reports by a number of outlets. The gargantuan money manager headed by Larry Fink has filed to offer its clients exposure to bitcoin futures through funds, BlackRock Strategic Income Opportunities, and BlackRock Global Allocation Fund, part of the BlackRock Funds V series, according to paperwork submitted with the Securities and Exchange Commission. Fink said that the distributed-ledger-backed asset could eventually evolve “into a global market,” but described its current status as in its infancy. Rick Rieder, BlackRock’s chief investment officer for global fixed income, said in a Bloomberg Television interview last year that there’s a clear demand for Bitcoin and that “it’s going to be part of the asset suite for investors for a long time.” Sources: MarketWatch, Bloomberg
Beware Terrible Financial Advice on TikTok: People are learning all kinds of new things on TikTok: how to do viral dances to popular songs, how to make hot cocoa bombs or paint an accent wall. They are also learning dubious financial information from unverified sources with millions of followers. Personal finance TikTok, also known as #FinTok or #StockTok, has become a massively popular segment of the app that. Some of it is perfectly fine but at its worst, Finance TikTok perpetuates financial myths, scams, and dangerously misleading information. And with TikTok's unmatched ability to show an average user's video to millions, the worst of it also spreads like wildfire. Vox business and politics reporter Emily Stewart breaks down 10 of Finance TikTok’s most viral investing videos, what they’re actually selling, and why you might want to think twice before falling prey to a get-rich-quick scheme, or worse, accidentally doing something illegal Source VOX
Pandemic's Blow to Business Travel Could Linger for Years: The coronavirus pandemic delivered a lingering, and possibly permanent, hit to business travel that is likely to weigh on employment and economic growth in some communities for years. Beyond the blows to airlines, hotels, travel agents and rental-car companies, the drop in business travel is rippling through whole ecosystems of related commerce, including airport shops, downtown bars and restaurants, construction firms, entertainers, taxi drivers, and aircraft-parts manufacturers. About one million travel-related jobs have been lost since February, according to the Labor Department, including more than 600,000 hotel positions and 120,000 airline and related staff. Domestic and international business travelers in the U.S. directly spent $334.2 billion in 2019, supporting 2.5 million jobs, according to the U.S. Travel Association. But when considering the follow-on effects, it estimates the economic output and jobs supported by business travel were roughly double those figures before the pandemic. When business travel does return, it’s likely that costs will rise as the airline industry struggles to regain some semblance of financial stability. Airline industry group IATA estimates that fares could go up by +54%. At the same time, 60% of business travelers polled by BCD expect to be traveling regularly by mid-2021, rising to 90% by the end of the year Source WSJ