Asian stock markets were mixed, and US stock index futures fell slightly. They ignored the heavy news of US President-elect Biden’s announcement of a $1.9 trillion stimulus package. This may be the so-called "buy news and sell facts" in the stock market, because the market has already fully anticipated the introduction of a new round of stimulus plans.
Moreover, increased stimulus will undoubtedly increase fiscal pressure, and the market’s concerns are understandable. Companies are facing the risk of tax increases and Biden called for an increase in the minimum wage, so that operating costs may rise, so market risk appetite has fallen, and investors have partially profited.
The New Deal may also bring some negative consequences for the stock market
There are rumors that after the US$1.9 trillion fiscal stimulus measures are implemented, the Biden administration will implement more relief measures. Recently, it is this expectation that has pushed up risky assets.
However, some other policy measures of the new government may curb stock market risk sentiment, such as strengthening supervision, thereby weakening the boosting effect of stimulus measures on the stock market.
The epidemic situation is still grim
The US market is about to usher in a long holiday weekend, and investors need to weigh many factors. Although fiscal stimulus brings hope, investors must also consider that stock market valuations are already at an extremely high level and the new crown epidemic is still raging. The epidemic situation in the United States and Europe is still severe, and it will take time for the vaccine to be vaccinated on a large scale and produce the desired effect.
From the data point of view, the US economy urgently needs more support. The number of people applying for unemployment benefits for the first time each week announced on Thursday is back close to the one-million mark, rising to the highest value since August last year. There will be new data coming out later today, and the performance may also be unsatisfactory. The market expects US retail sales growth may stagnate in December and consumer confidence will decline.
Powell says he is biased, the price of gold rises
As Fed Chairman Powell refuted the view that the Fed may soon begin to reduce bond purchases, the 10-year Treasury bond yield fell to 1.11%, and spot gold rose slightly. At present, the 10-year U.S. Treasury yield is still far below the pre-epidemic level, but it has stabilized above the important psychological threshold of 1% since last week. The recent steepening of the yield curve shows that the market remains optimistic about the outlook for the US economy and inflation. Powell promised to provide sufficient early warning time before reducing debt purchases to avoid triggering a “taper tantrum” situation that was unpredictable in 2013. The dovish stance of the central bank will continue to support gold prices for some time, and gold bulls will be encouraged by it.