With all the noise of the US run-off election out of the way we are seeing fresh all-time highs in the US, and it seems we are also set to break higher today. Nothing has changed really, the equities markets are a balance of Virus, Lockdowns, Stimulus, and Vaccine. With the Democrats winning control of the senate, we will likely see more US fiscal stimulus sooner rather than later.
The next big thing that markets will be focused on is US company reporting which kicks off later this week. We will see some of the big US banks of Friday; JPMorgan, Wells Fargo&Co, and Citigroup. Reporting could trigger certain stocks to move largely as we get further insight into how well or bad stocks are going in this uncertain environment. Keep in mind people will be focused on future guidance more than current profitability.
The XJO is poised to edge higher on open this morning. This follows both a positive move from the U.S on Friday and their futures this morning.
The recent strength overseas has not been fully reflected in our market as we continue to trade in a more sideward channel. The post fall highs around 6750 is holding us back, but with today’s positive open perhaps we will breach it. This will also largely depend on how the U.S futures move during in our session today.
Strength in the U.S is likely fueled by further stimulus talks from Biden’s new government but the disconnect between the economy and the market is shifting the commentary to a warning of an overheated market. We remain hopefully cautious.
On Friday US shares again closed higher, although it was a whippy session that saw prices trading in the red at points. US economic data released on Friday was mixed, with unemployment slightly better than expected, but with non-farm payrolls worse than expected. President Elect Joe Biden has indicated that he would be willing to provide ‘trillions’ in stimulus to supprot the US economy.
Technology stocks continued to lead the rallies for US shares, while Utilities, Health Care stocks, and Financials also rose. Every other sector was fairly flat, except for Telecoms, which fell substantially. Share prices are quite high at the moment from a valuation perspective, and there is a risk that rising US government bond yields start to weigh on prices moving forwards.