Financial markets have shaken off the violence and chaos on Capitol Hill, with both the Dow DJIA,
and S&P 500 SPX,
On Wednesday he reached new highs and the Nikkei 225 set another 30-year record on Thursday.
But investor optimism could be dampened as we move forward into 2021 as Citi’s global strategy team said global equities will remain stable throughout the year, in our call of the day.
The investment bank strategists have only predicted a 2% rise in the benchmark MSCI All Countries World Index 892400,
over 2021, and have neutralized their propensity for growth sectors in favor of a rotation in value stocks.
Lowering the temperature due to their long-held preference for growth stocks, which historically has kept their rating in the US market overweight, is part of the rationale behind lowering the US market to neutral.
They also saw the US budget deficit as a threat to the dollar, which is expected to weaken this year, boosting emerging markets and commodity stocks.
But bond yields could be hiked, aided by a recovery in the global economy, with Citi predicting the 10-year yield on US Treasuries (currently 1%) will be 1.25% in the coming months and 1 by the end of the year. 45%. They said this should help financial and energy companies, which are value stocks.
The best returns are expected in the UK, where Citi forecasts 7% growth for the FTSE 100 UKX,
and Australia, where they expect the S & P / ASX 200 XJO,
6% increase. Emerging markets, especially China, Korea and Russia, are strategists for growth.
Their “slightly optimistic” view of global equities hinges on the success of COVID-19 vaccines in rebooting the global economy. Citi economists forecast a 5% increase in global gross domestic product in 2021, after a 3.9% contraction in 2020.
Both factors should drive corporate earnings recovery, with earnings per share recovering most in the most battered sectors.
The Citi strategists said much of their recovery forecasts may already have been priced into the market, as the MSCI All Countries World Index trades at 20 times consensus earnings per share – much higher than the long-term median of 15 times. By that measure, the US is the most expensive of the major markets and the UK the cheapest.
In terms of sentiment, Citi said we are deep in euphoria in the US Panic / Euphoria index, indicating that corrections may be coming. Their suggestion? Buy the dip.
The buzz
President Donald Trump acknowledged the defeat in the US presidential election and said an “orderly transfer of power” will take place. His concession came after Congress certified Joe Biden and Kamala Harris’s victory and voted in the night after a violent pro-Trump mob stormed Capitol Hill on Wednesday.
Also: Why the stock market recovered even when a violent mob stormed the Capitol
Technology giants Facebook FB,
and Twitter TWTR,
has taken steps to limit Trump’s ability to communicate with supporters during the Capitol Hill siege by temporarily locking his accounts amid the violence that claimed four lives.
Plus: World leaders Boris Johnson, Justin Trudeau and others condemn ‘shocking’ and ‘shameful scenes’ in the Capitol
Senior members of the Trump administration have discussed the possibility of invoking the 25th amendment to the constitution, according to CBS. If invoked – for the first time in history – it would remove Trump as president and make Vice President Mike Pence the commander in chief.
Read more: To accuse again? 25th change? Several ideas emerged to end the Trump era now
US officials are considering banning Americans from investing in Alibaba and Tencent, China’s two most valuable publicly traded companies. That would expand the efforts of the Trump administration to blacklist investments in Chinese companies related to the country’s military.
Sports betting stocks like DraftKings DKNG,
Caesars CZR,
and MGM Resorts MGM,
Trade on Wednesday surged after New York Governor Andrew Cuomo changed his voice about legalizing the practice. Cuomo said New York had the potential to become the “ largest sports betting market in the United States. ”
The markets
Stock market futures YM00,
ES00,
point slightly upward, ready for a soft but positive opening to continue Wednesday’s record highs. Asian markets NIK,
HSI,
SHCOMP,
checked while European equities SXXP,
UKX,
DAX,
PX1,
act just above flat.
The market is responding positively to the Democratic sweep ushered in by the two Senate final victories in Georgia, which increases the chances of more fiscal stimulus measures as Vice President Harris would issue a tiebreaker.
Read more: Democrats win the second election in Georgia and give their party control of the US Senate
The graph
Yields on US Treasuries, shown in our daily chart of Marshall Gittler at BDSwiss, rose sharply when the first two races of the Georgia Senate were called up for Democrats. 10-year revenue TMUBMUSD10Y,
Up 8 basis points to 1.04% – the first time they were above 1% since mid-March 2020.
The tweet
Research by YouGov found that one in five voters approved of the storming of Capitol Hill, and that a majority of Republicans blamed President-elect Biden.
Random reads
New pub doing roaring trade during lockdown after opening in nursing home.
On the llam: ‘Very chill’ llama found wandering off the highway in Massachusetts.
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