Coronavirus is starting to make an increasing number of adjustments to the chief financial administrations of developed countries. An avalanche of new diseases in the UK and Ireland puts economic growth in doubt for the first half of 2021.
Another conflict between Democrats and Republicans is brewing in the US. The FBI has even warned of possible armed protests in connection with Joe Biden’s inauguration as president. In parallel, the US parliament wants to vote to impeach Trump. All this political turmoil is not good for the current market situation. Investors are eagerly awaiting Biden’s speech, which is expected to outline future stimulus measures.
There are rumours that there will be a lot of money coming into the economy, up to USD 3 trillion. Biden will try to make this aid package as universal as possible to meet the expectations of the electorate.
However, already now the S&P500 index is at its all-time highs. Excessive investor optimism could lead to some corrections in the equity markets.
There is also some news from the US Federal Reserve. Officials are beginning to hint that perhaps bond purchases will be reduced by the end of 2021. Of course, the coronavirus could make unpredictable adjustments, but such statements could support the US dollar against the Euro and other major currencies.
The possibility of an additional lockdown is growing in Europe. Angela Merkel is considering extending the quarantine. This means that it is likely that one of Europe’s biggest economies will continue to be bogged down by COVID-19 throughout the first quarter of 2021. Other European Union countries are concerned about a sharp rise in infections with the new type of coronavirus in the UK and Ireland.
Uncertainty in the US markets, together with a strong rise in Europe, signals that a difficult time is beginning for all market participants. Long-term decisions will not be possible and will have to be analysed almost on a daily basis.
In the current situation, the S&P500 index could go into a small correction before Joe Biden’s statement and the release of details of his programme.
What’s in store for us today?
10.00 ECB President Christine Lagarde to give a speech
14.30 US Core CPI for December
16.30 US Crude Oil Stocks
Important Notes on This Publication:
The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.