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Good morning, Bull Sheeters! The 46th President of the United States is sworn in today and the mood in the markets is optimistic. Carefully optimistic.
The source of the investor exuberance comes more from Wall Street than Washington, it must be said. A multitude of blows from Netflix, Goldman Sachs and Bank of America fueled risk sentiment yesterday. More big names report today.
Still nervous about how the prospect of one-party rule in Washington will affect your portfolio? I covered you in today's essay.
But first let's see where investors are putting their money.
- The mayor Asia indices tend to be higher in afternoon trading with Hong Kong Hang Seng above 1.1%.
- Jack Ma is back. China's best-known and most visible tech entrepreneur made public appearances for the first time in two months. Investors cheered and sent shares to Alibaba 9.3% higher on Wednesday at one point.
- Bow, Taiex. The Taiwanese stock market soared 92% in the last four years the crown of the Best performing stock market the Trump years.
- The European stock exchanges were mostly higher in early trading Stoxx Europe 600 above 0.2% one hour after the start of trading.
- The chip boom was good news for the Dutch tech giant ASML, which saw a big jump in profits on Wednesday.
- The European Union wants the Euro to be the emerging currency in world trade, starting with green finance. The euro rose this morning after the European Commission yesterday outlined its plans to strengthen the single currency.
- Italian Prime Minister Giuseppe Conte weathered a vote of no confidence on Tuesday night, but the government is weaker than ever. His archenemy, Matteo RenziThe former mayor of Florence apparently has to reread another Florentine, Machiavelli. Renzi's attempt to overthrow the government was the equivalent of placing a wad of sticky chewing gum on the teacher's seat.
- US futures rose slightly this morning. That's after all three exchanges closed in the green on Tuesday, aided by decent gains from the likes of Bank of America and Goldman Sachs.
- Netflix shares soar in pre-market trading this morning 12.3%. That's after the streaming service totally destroyed and tightened it last quarter 8.5 million new subscribers to shows like "Bridgerton" and "The Queen & # 39; s Gambit". Who knew there were so many chess fanatics out there?
- Today's earnings calendar includes Morgan Stanley, Procter & Gamble and United Airlines to name a few.
- gold is above and acts above $ 1,850 / ounce.
- The dollar is down.
- Raw is on, with Brent Trade above $ 56 / barrel.
- Bitcoin is 4.3% decrease in the past 24 hours $ 35,700.
Tangled in blue
It's inauguration day, so I'll be diving back into the archives to check out an article I wrote on the eve of Election Day in October for our final quarterly investment guide. (Program note: Fortune will be releasing the next QIG in the coming days; stay tuned.)
At the time, Donald Trump had just developed COVID-19 (yes, that was only a few months ago), and the markets chugged on as Wall Street began pricing in the prospect of a blue sweep.
Ian Lyngen, a bond analyst with BMO Capital Markets, wrote in an investor note at the time that a Joe Biden win "could be an extremely positive event for domestic stocks."
Lyngen did it. The S&P 500 is up more than 12% since the beginning of the fourth quarter.
This achievement may surprise some people. “Usually,” I wrote at the time, “Wall Street hates party control. And, if anything, it usually prefers a Republican with low taxes and regulations in the Oval Office. This fear is profound, even if historical data does not fully support the paranoia. "
History has shown that in years of two-party control, the S&P has performed better. As the graph here shows, the US economy has done best in years when there was a Democrat and a Democrat-controlled Congress in the White House.
That trend is almost certain to continue this year, as economists predict the U.S. economy will rebound strongly in 2021, aided by an increase in stimulus spending. After the Georgia runoff election, Goldman Sachs increased the U.S. growth rate to 6.4% in 2021. By the way, Goldman also saw the S&P rise 13% that year, which is more or less the historical average of a Democrat-controlled Washington (see chart above).
Now we all know that past performance is not an indicator of future returns. And of course a new axis of power in Washington means there is a new set of winners and losers. The dollar is clearly in the latter camp. Small-cap stocks are among the former as investors look to the American economy to make a comeback.
Sure, there is a risk of a tax increase. And America's finances are a basket. But the markets don't take any of that into account. At least not yet.
And of course we will keep you informed if this changes.
I've heard from a lot of Bull Sheet readers in the past 24 hours. I can promise you: In the coming days I will be presenting our recipe for the exquisite ribollita, a robust dish for the dead of winter.
Turns out we never wrote it down so I need to take some notes and check them out with my partner for crime.
In the meantime, you should check your butcher for pork bones. You will need them for this recipe.
I wish everyone a pleasant day. See you here tomorrow … Until then, there's more news below.
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