The investors are hugely eager for bipartisan aid regard COVID-19 relief package, with the present dust that had continued to keep settling down with respect to uncertainty as well as US Presidential election, with same older issues within the Congress that have irritated the market sentiments previous week. With a lot of speculated election related uncertainty, the established conclusive Joe-Biden’s triumph has sparked up an initial mounting move within the risk markets-however, across-the-aisle political gridlock has further smoothened the sentiments of investors.
Within Monday, topmost Democrats as well as Republicans thrived hard for discussion of longer-awaited COVID-19 relief package, it was quite apparent that there were absolute negligible deals that will be highlighted within the instant shorter time frame. Senate majority front-runner Mitch McConnell stated that there is a restricted stimulus bill that should be approved by the cease of the year. However, Senate Democratic head Chuck Schumer stated that “The Republican proposal is a complete inadequate resolution.”
For a large time-frame, Democrats as well as Republicans have engaged themselves regarding the overall package size. Within the October, the directed plan by Democrats was within the range of $2.2 trillion (A slump down from within their original $3.5tn package) while the correspondence of $1.8tn plan by White House, was rapidly rejected.
There is an eager anticipation of second Covid-19 stimulus package by global Financial markets. Within March, there was an extension within the proposed initiative with the latest economic relief package has kept a lot of the benefits of the unique initiative, that also included potential second stimulus cheque of up to $1,200 for Americans who have qualified as well as broadening of $600 unemployment benefit.
During previous week’s Federal Open Market Committee meeting, Federal Reserve chair Jerome Powell put the sphere in the court of the federal government, asking it to declare the much-needed stimulus. This theme will be vital to the presentation of financial markets going forward, as we have already seen from the current pricing action.
What is also vital to note in this scenario is that while the race to the White House and the House of Representatives is confirmed, there are two core Senate seats up for grabs in Georgia, which could determine the equilibrium of power in the upper house of the Congress. If Democrats manage to make a good run in the January 5 run-offs, it would see the stability of power shift and make passing policy for the Democrats and Joe Biden much relaxed.
It remains to be witnessed if the fiscal stimulus package will be distributed before the outcomes of those run-offs or if the two parties can approve and deliver it by December.
Antiquity has shown us that US stock markets typically rally in the outcome of a presidential election, but this time, we could see an anaemic pricing action if this deal fails to pan out sooner rather than later. Expect this to be the core theme for US markets in the weeks ahead – which will also power way for an investor mood.
I am keeping a sense on the 29,933 print and expect to witness another track to this level in the forthcoming two weeks, backed purely by a psychological and sentiment-driven trade. But overall, I would return from construction of any positional, long-term trades within the US equity markets until the stimulus plan is purer.
The US dollar has had a turbulent few week as risk appetite has enclosed higher following the election confirmation. Already showing a slump down of 1.2 percent on the month, we are witnessing few respectable procurements coming into the US dollar index in the channel between 92/92.20. These levels should hold in the next two weeks while positives will be capped at 93.50.
Looking at the performance of the Dow Jones Industrial Index, at the time of script it is currently trading at the 29,000-level post testing the all-time high of 30,000 on Monday. Markets caught a nice offer to run to that 30,000 level after Pfizer came out with encouraging news that a vaccine that prevented more than 90 percent of coronavirus infections was being established. While the jubilation settled post the initial news, markets absorbed the reality of timelines, scalability and delivery of a large-scale vaccine to the people, and as a result sold off after the initial hype.