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The second week of December starts with a new wave of investor optimism. Although last week ended with a relatively weak labour market report, it was not followed by a sale of shares. Let us try to understand what awaits the American market and the S&P 500 index in particular in the near future.
S&P500
The conflict in the Senate between Democrats and Republicans is only intensifying. Elections to the US Federal Reserve are in a tense position. Some candidates find it very difficult to get into office. The democrats do not want to give extra points to the outgoing Donald Trump.
Due to the change in Fed membership, management policies are unlikely to change. There will be a forthcoming meeting on 15-16 December to announce further action on asset purchases, but history shows that the Fed has tried not to make abrupt statements in its action plan before Christmas at the end of the year, when market activity is declining and many people are leaving for the Christmas holidays.
Against the backdrop of optimism, the S&P500 index has reached another high. In such a situation, it is worth watching closely how investors will behave and to what extent the risk of buying further is justified.
If there are some sell-offs of risk assets from current positions, it can be said that the markets have reached a certain maximum of their movements. An additional pressure on the index is the increased yield on long-term government bonds, which makes them slightly more attractive to buy.
Of course, the bulls may be stimulated by new stimulus measures that have been effectively pulling up quotations throughout the year.
It is still difficult to determine when buyers will not be left to continue growing. Now there are enough assets that look like they have been bought up. The end of the year is on the nose and it is possible to take profit from investment funds. In the current situation, the risk/profit ratio for buyers does not look very attractive.
What awaits us today?
08.00 German trade balance for October
16.00 Number of open positions on the job market JOLTS in USA
16.30 US crude oil reserves
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