A Snapshot of the Week Ended January 15, 2021:
The stock market was remarkably indifferent to Powell’s assurance that the Fed was not about to change its current monetary stance anytime soon and to Biden’s $1.9 trillion plan to reinforce the recovery. It looks as if the financial markets have discounted the anticipated benefits of the Blue Wave scenario. By the end of the week, the U.S. dollar was stronger, government bond yields were lower, gold was weaker and so was copper and oil. Interestingly, financial conditions including narrower credit spreads improved. For example, JPMorgan released credit reserves of $2.9 billion because “the improvement in the macroeconomic scenarios and the continued ability of clients to access liquidity and capital markets” permitted such a decision. Nonetheless, traders have been publicly calling for a pullback, proposing that the rally had gone far enough for now and suggesting that the adage “buy the rumor and sell the news” may have come into play.
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By Hubert Marleau
By Hubert Marleau