US Stocks Hit All-Time Highs As Biden Becomes The 46th President

Okay, very good morning. It's just gone through 7 o'clock here on Thursday, 21st of January. Hope you're doing well. For any of those who didn't or haven't not yet seen it, we had a really fantastic masterclass session with Hany Redder of Pinebridge Investments yesterday. He gave a fantastic kind of open Q&A about his kind of structure and approach to kind of how he defines his macro strategy with his team. So some really great insights there. So do check that out on the Amplify Live portal when you have time. But otherwise, look, let's get straight into it and talk about the markets this morning. And yeah, all-time highs right on cue, of course, for Biden's inauguration. All three major indices continuing that, that higher close on Wall Street we had last night. Outperformance once again in the NASDAQ was up 2.3% comparative to, to the Dow up just 0.8% and the S&P up just 1.4%. Kind of two points on that, I would say. One is, is that stimulus with the vaccine rollout and then all the right kind of influential members in the right positions, i.e., that being Biden at the helm supported by Yellen at the Treasury and Powell at the Fed, it's just got people feeling pretty bullish, as I was kind of saying in yesterday's briefing. The idea here being it's almost like a subtle Goldilocks scenario, which is something we've— a word that's banded about a lot in recent years, particularly under Yellen's leadership. And it's this idea that rates aren't going to change realistically in the US anytime soon. And as we were discussing a few weeks ago, I did feel like the taper word going around was a little bit premature, and that's kind of fallen away quite quickly. But if they do go big, then obviously that's a bullish factor on the fiscal side, supported by an accommodative kind of environment from the central bank being supportive of that. And then the other thing is, of course, the second point, the idea that the Senate is so wafer thin in terms of the majority that the that the Democrats have, that there can't really be much in the way of probably substantial policy change. And therefore then, you know, things like severe regulation on antitrust, on big, big tech and things like that, um, is, is a lesser likely to be so severe. And so again, it's like a perfect storm. And, and hence the reason why I think explains a lot of the moves that we were seeing yesterday with the breakout, of course, technically through the previous all-time highs. So overnight, the Asia-Pac session, we kind of followed that through. Um, so stock indices, uh, marginally higher again going into the European open. Then whenever the market moves like this, it's not too surprising to see it at least at some point a degree of consolidation perhaps before then we, we see the next kind of move. So here we've had a little bit of a pullback from the initial overnight Asia-Pac highs. So just responding to the late Wall Street, uh, top that we saw in the futures market here, looking at the S&P, and just finding a bit of a floor this morning, European session. So it'd be interesting to see now, do we just hold and consolidate around that until the US come back in? Yeah, long term it seems like an inevitable push now up to 3,900, um, whether or not we got that, the, the shorter term pullback, and if we've already seen that entry point then to rechallenge those highs and push on up to the R1 and above, or even if we pull back lower, uh, further down to say the 42 area, ultimately I think this market is going higher from a directional bias. So the other indices have followed suit in the futures. Note the NASDAQ finding a little bit of short-term resistance around this R1. Um, but yeah, elsewhere, oil markets, uh, pretty flat. A bit of a recovery after, as you can see here, this uh, red candlestick saw a bit of a dip on the API inventories last night. So just quickly, the number there was a headline build of 2.5 million. Expectations were for a drawdown of 2.5 million. Do note though that Cushing was a draw of 4.3 million. Gasoline, there was a build of 1.1 million. So net-net, there wasn't any sustainable reaction to those APIs last night despite the slight breakdown in price that we've had. We've recovered, we're pretty much scratched from where we were. So I think those inventories are a bit of a moot point, to be honest. T-notes, pretty, uh, uninteresting this morning. A quick look at gold. Well, actually, before sticking on the commodities, with oil, although those API is a little bit, um, uninteresting, worth keeping an eye, I think, on the, on, uh, higher or bigger picture of things. This trend line that comes in from the peak that we had on the 13th to the 14th and what, uh, confined the upside price action from yesterday. Bearing in mind we've got the DOE coming up later, uh, so be looking probably around a kind of price framework of operating around here. And obviously if we came back up to those levels here would be an interesting way to look at the broader range for the crude market today. In terms of commodities, as I said, looking at gold, uh, yeah, decent, decent push yesterday, of course, after the initial dip. And again, just responding down on the bounce to an area of technical support, and then continuation of that push-up does come as the dollar continues to remain weak. And that will lead us into the currency pairs. The DXY down this morning 0.2%. Again, that kind of feeds that narrative of what we've just discussed, of what's chiefly supporting the equity market as well, with the idea that, you know, if any stimulus does come, it is not going to be supported by any further tightening of federal policy anytime soon. So with gold on the daily continuation, this was an area we were looking at yesterday, kind of two areas here. I'll put a rectangle, and first off, which is these ellipses here, I've got from an August low some previous other points of support and resistance. I thought just given the severity of the push-up— this is the blue line through the 50 DMA— then I'd be looking for a little bit of resistance, which is where we're kind of sat at the moment at around 1874 in futures. Any further push-up, I'd be keeping an eye around that level, which would come in in today's session around 1890 type of area, which would be that descending trend line going back from the peak of activity we saw when we were right up in excess of 2,000 back in the summer of this year. In those currency markets, uh, cable is at some interesting levels, uh, continues to rally irrespective of the fact that COVID situation and death count is particularly harrowing at the moment in the UK. Hospitals are still being severely stressed at this point in time, and there's a lot of questions about the effectiveness in an Imperial College study that I've seen come out this morning of what this latest national lockdown has actually done, which is in fact very little. But nonetheless, I think when it comes to interpreting that news flow, I can update you on some other COVID stuff in a moment. I think you've just got to focus on what the market's moving on at the moment. And unless it is quite definitive where the— a new variant emergence that does render those vaccines redundant, which isn't happening at the moment, and work's being done to safeguard against that, well then I don't really see too much more of an impact that that could have at this point in time, all things remaining equal. So as much as there's bearish news out there, I think at the moment you've got prevailing dollar weakness that is supporting both major pairs, which are both up this morning, perhaps a little bit outperformance in cable. You can see here cable coming up to what is in the last week's worth of price activity, a fairly interesting area of resistance Um, it's had a little push up, finding some resistance around R1 in the future. We did have almost like a false break, yeah, yesterday, uh, yesterday morning. But if you look on the daily continuation, this is a big level for Sterling, and this 137.13 does mark the high that we were trading at around Sep of 2017, a support area in March 2018. So a push above here does open up the prospects of a further move higher. I do think that that will happen, whether that's today, the coming days, or weeks. I do think that we are going to push higher here. I think that the national lockdown in the UK will get extended, which you would equate to being a negative in terms of general activity economically in our country. But the idea being here is that so far I think the vaccine program, albeit I think they'll miss their initial target for mid-February, is going better because people, I guess, benchmark it against comparative to how well it's being administered elsewhere. And the UK has been relatively good, irrespective again of some other news talking about some of these supercenters they're setting up are actually not viable in terms of location for hundreds of thousands of people around Britain again. I think people love to dwell on the negative news at the moment. This market's moving up, and again, it's mainly a dollar weaker story. Um, Brexit obviously is a side issue right now. No one's talking about that, and, and neither should they. It's not really that important for markets if you're talking about the intraday environment. So something to keep an eye on, I guess. Where we close today, this week, uh, could be quite interesting then for the following week. Do we start to see then a further kick on and continuation for the time being in sterling. Euro, obviously we'll talk about that more later. ECB is going to be firmly in the crosshairs for what's probably going to be moving markets later on in terms of press conference with Christine Lagarde. So let's, let's tie through— well, let's go through a couple of the headlines this morning and not focusing on the inauguration of Biden. He has done a number of policy changes. Obviously, I think there's 15 executive orders he had done yesterday. Some of those could be quite impactful in terms of the Keystone Pipeline change. It's going to impact perhaps relationships with Canada short term, but also some of the related pipeline stock names in the US. But away from a lot of that, I think the main thing now is talking about what the stimulus he's proposed, what can he actually get passed and how timely is it going to be? And here then was quite an interesting development from last night where basically Biden's proposed $1.9 trillion pandemic relief got a skeptical response from two GOP members in the Senate, Mitt Romney and Lisa Murkowski. The Senate being 50-50 split, Biden would need at least 10 Republicans to speed his plan through the chamber, which seems a very unlikely prospect. Alternatively, the incoming Senate Majority Leader Chuck Schumer could use something we spoke about last week called the reconciliation process, which only requires 51 votes. But some parts of stimulus bill are likely to prove particularly difficult, if not impossible, to qualify under the rules that would capture that process. And ultimately as well, something that Citi were talking about last week is that you know, just inactioning reconciliation as a process is not something you can just roll out time and time again. And it might be that when you think about the Biden stimulus plan, it's kind of coming in two waves, so to speak. There's the initial COVID relief one that we know of that's been announced, and there's one to come, which is the recovery plan, which is more infrastructure-focused, which ultimately is probably more defining for his presidency and what he'll be looking to do that will be around longer and have arguably then a domestic, more longer-term payoff than the initial hit of the relief trying to address the severity of the current pandemic status. And so does he leave it, you know, does he hold it back, that process, for perhaps trying to push through things more on the infrastructure side, which is one of the cornerstones of his overall administration's policies? So yeah, a couple things to think about. That's not really too much new. I don't think it was too unsurprising that would be the case. But something to keep an eye on nonetheless. Overnight, the Bank of Japan— don't really need to talk about this a great deal, to be honest. They left policy unchanged as expected. They took a slightly gloomier view of the current state of the economy. They themselves as a country have been having a fairly tough time handling with COVID-19, as with much other areas in the world at the moment. The BOJ concluded that weaker growth at the end of the current fiscal year and government stimulus package announced last month, though, would result in a stronger rebound in the year initiated in April. Uh, so reaction in the end, uh, not really a great deal. If anything, a little bit of strength just coming in, but probably in part helped by the overall risk appetite that's been present across asset classes with the general continuation of the equity move and the positive sentiment from yesterday. So look at the dollar-yen futures sitting around support on its S1 at the moment this morning. Going to COVID, Germany and Britain, you probably saw yesterday, suffered their worst record daily death count. And a few other things to be aware of though on the back of this. One is that those countries particularly suffering from the new emergence of this this latest variant, um, definitely then I think it requires vigilance, that you've got to keep an eye on these things even though perhaps they're not having a direct market impact for now at least. So this was an interesting article that came out in The Telegraph last night just after about half 9 PM, and it was talking about Oxford scientists. So obviously Oxford University being the ones that have been working in conjunction with and in collaboration with AstraZeneca, that they're preparing a new vaccine version to combat these emerging strains. So, you know, strategically absolutely makes sense. They probably have accumulated now, given the rapid outbreak of the new variant, enough data to be able to try to already put this into play. I guess the question comes more about pulling the trigger on the actual manufacturing, given the cost implications that that has. So I think this, that's quite a positive development. Prime Minister Boris Johnson is said to be holding pretty intensive talks with the scientists at the moment. It seems the most prudent thing to be doing at this point in time, which is let's just not wait for, you know, continuing to accumulate information about whether or not the vaccine is still effective. Let's just start preparing and getting things underway now. Now, one thing that UK arguably has been quite good at is spending a lot of money on these things comparative to some other countries. And I think that has and will not just pay dividend but will yield results later on down the line. So yeah, that's something to be aware of. And it does come on the coattails, of course, of yesterday. You probably saw that BioNTech and Pfizer vaccine was found to be effective against the COVID-19 variant. That was according to a laboratory-based study by various different companies. So that question again, has the, has the mutation of the virus rendered these vaccines redundant? No, is what these studies would suggest. And also there is some degree of preparation happening already with some of these Oxford scientists. So yeah, a couple things there. The ECB has one of the main events obviously of this week and of today, and this really is not an event to expect any great deal of, of action on the actual policy side of things. So as per usual, the ECB is a two-part event. You have the actual policy statement, and therein lies any changes to policy, but that's unlikely to happen at 12:45. So very unlike December's meeting where they did unveil their latest changes, the 12:45 section is probably going to be pretty boring. The press conference really is where it's at. And on that note, I did put Anthony Cheung put out a tweet yesterday and I was sharing it with our community. I thought it's just kind of really the summary here of what I'm looking at. And that's the press conference. What is she going to say on 4 key points? I think in focus that not just me, but I'm sure all market participants would want to look at and the ones of which I think would create the greatest sensitivity and potential market movement. So this is extensions of lockdowns. Emphasis on Germany and the Netherlands, who have particularly stringent lockdowns, even more so in the spring at the moment. And just given the size of their economies and their overall impact then on the eurozone, the pace of vaccination rollout— again, some countries have been faster than others, namely France being quite slow. The developments of the new variant— does she have anything to say about these things? Also, you know, things have changed. The Georgia Senate seats switch, the blue wave. These were all new things that we haven't really had her challenged on as yet. So I'm quite interested to see whether or not that influences their thinking going forward. And then recent political instability, of course, in Italy. Talked yesterday about this, not yield but spread control. I'm sure she'll be questioned about that as well. So these are my— this is my checklist of main things I'd be looking out for to monitor that could create potential interest for markets later in the press conference. That'll be at 1:30, of course. Course. There is, as per usual, and I have shared this in the, the Amplify Live Discord room already, the crib sheet. Um, it's always worth having this crib sheet. It's incredibly useful when there is policy change, given that it's kind of categorized in the 4 key components that define the ECB's policy. But as I said, this time around we're not expecting any change here, so it's kind of a lesser important on this particular in the context of this meeting specifically. Quick look at the calendar then for the rest of the day. You know, overnight we did have some Aussie jobs data. In fact, again, not, not a massive deal on the back of that. Unemployment 6.6% against expected 6.7%, so no real major reaction to that. It's pretty quiet in the UK European morning then until we get into the ECB. 12:45, the presser at 1:30. That's going to be alongside the weekly jobless claims. So you remember last week we had a print of 965,000. This was in fact then the highest number since around mid-August, which was when we were coming off the back end of the, um, the Sunbelt outbreak of COVID which required more, more onerous restrictions, which obviously saw jobless accelerate. And here we are again because, you know, away from the vaccine situation, the reality on Main Street is that a lot of industries are still being impacted very much so, irrespective of some of the glimmers of hopes with record rates starting to decelerate slightly in the likes of California and other places in America. So this number, top end of the range, actually is for in excess of a million, up at 1.1 million. I guess the main thing that I would say with jobless As much as a breach over 1 million is symbolic, it's a multi-month high. I think you've got to take it into context with there's new stimulus afoot. And the reality is, is that, you know, the Fed, particularly people like Janet Yellen, you know, with the Biden stimulus, are going to be very conscious of trying to get unemployment back into the, uh, as much as possible and be supportive of that. So I think people are, uh, would, although the jobless rate can act as a catalyst if near some key technical levels, I think people will be happy to take a step back and think of the broader picture that, look, for the time being, we can live through some of these elevated jobless numbers without it creating too much negativity, would be my kind of view on it. Other than that, yeah, it's, it's, it's pretty quiet. I mean, unless you're a fixed income trader, the supply coming out of France and Spain and the UK, as well as a 10-year TIPS auction out of the US later. But that's pretty much your, your day. So gonna leave it at that, let you guys get on. Any questions at all, feel free to leave a comment. If you are watching this on YouTube and you've made it through to the end, well done. Um, but any questions, let me know. Uh, and please do like and subscribe to the channel. It'd be much appreciated. All right, have a good day. Take care.