What’s Happening: Political instability often weighs on currencies around the world, and the violence incited by President Donald Trump is unlikely to bolster confidence in the US dollar at a time of weakness.
“In some ways that resilience is encouraging,” he told me. “However, we cannot necessarily take that for granted.”
Eurasia Group, the political risk consultancy, cited a divided United States as the greatest risk for 2021. Domestic political dynamics, along with the country’s mismanagement of the pandemic, will make it difficult for President-elect Joe Biden to manage global America’s leadership. despite his best efforts, said Ian Bremmer, the group chairman.
“The US is by far the most politically dysfunctional and divided of all the world’s advanced industrial democracies,” Bremmer tweeted on Thursday.
Investor Insight: Since it peaked during the market turmoil last March, the dollar has fallen more than 12% against a basket of other major currencies. The consensus on Wall Street is that there is still room to fall.
“The stars seem very aligned because of the dollar’s weakness,” Rumpeltin said.
Expectations that central banks will maintain very straightforward monetary policies as the recovery warms have also contributed. So believes that a Biden Presidency will usher in a period of greater predictability, which will reduce demand for safe-haven assets.
The big question, however, is whether political chaos will fuel a prolonged erosion of confidence in the US dollar, the world’s leading reserve currency. For now, risk appears limited, in part due to the sheer volume of dollar-denominated asset transactions.
But as Eurasia Group points out, America’s global dominance is facing real headwinds. One proof: Europe has just signed an investment deal with China designed to rebalance its trade relationship with the world’s second-largest economy, despite concerns from the US.
“Biden’s tenure opens the era of the asterisk presidency, a time when the resident of the Oval Office is considered illegal by about half the country,” the group said in the 2021 outlook. “Such a political reality is. never occurred in any other G7 country, but it is the reality of the world’s most powerful democracy today. “
How bad was 2020 for much of Corporate America?
A handful of tech companies thrived during the pandemic. But for most companies it has been a bleak year – and as earnings season begins, we are going to discover the extent of the damage.
The flow of companies sharing results for the October to December period is picking up this week. A number will also reveal full-year figures.
On the roll: Delta Air Lines, Citigroup, JPMorgan Chase and Wells Fargo.
Investors have been paying close attention to banks’ income, given what they can tell us about the state of the economy. With the United States cutting 140,000 jobs in December, far worse than what economists predicted, there will be many questions about the quality of loans and whether executives are confident about the current level of reserves.
However, much of the focus will be on the future. The KBW Bank Index, which tracks the US largest bank stocks, has risen nearly 40% since early November.
That’s because Wall Street looks forward to the economic recovery it thinks will be in full swing this summer. Banks’ fortunes are closely related to how the economy is doing. The prospect of higher interest rates down the line, causing banks to make more money from loans, also helps.
“There should still be a 10-15% relative increase in bank stocks and possibly more if the economic recovery lasts several years (before the next downturn),” Deutsche Bank analysts said in a recent note to clients.
Next one
Monday: CES, the consumer electronics show, starts virtually
Wednesday: US inflation rates
Thursday: Initial US unemployment claims; Jerome Powell speech; Tesco, BlackRock, Charles Schwab and Delta Air Lines revenue
Friday: US retail and industrial manufacturing; Citigroup, JPMorgan Chase, PNC and Wells Fargo Profits