The times, they are a-changin’
What you need to know in 5 minutes - Jan 18, 2021
It’s hard to believe but Trump’s presidency is actually coming to an end this week. Mr. Market is eager for the new administration to take over and bring back some sense of normalcy, both socially and economically.
New administration incoming
COVID’s global resurgence
Vaccination Tracker: 1,610,524 people fully vaccinated
What's driving the market?
Make it rain!
On Wednesday, Joe Biden will be inaugurated as the 46th President of the United States
Biden unveils a behemoth stimulus program as poor retail sales and jobless claims reports confirm further economic deterioration
Janet Yellen is expected to be confirmed as the next Treasury Secretary on Tuesday
But what does it mean?
As the economy continues to deteriorate amidst rising COVID cases, Mr. Market will be focused on the incoming administration’s 1.9T stimulus and vaccination plans. Financial markets expect a seamless transition back to economically-driven swings rather than Twitter-driven spikes. Additionally, Biden is expected to sign multiple executive actions on Tuesday to address the economy, immigration, climate change, and the pandemic (including mask mandates and reorganized vaccine distribution efforts).
What else should I know?
Covid’s back, back again, with a brand new strain
COVID continues dominating economic outlooks:
The world braces for a surge in COVID cases as new strains of the virus are found and cases in Asia spike
Eurozone leaders meet in the midst of continued COVID cases and low vaccination rates
Trump was officially impeached for a second time, but the Senate is unlikely to hold the trial until after Biden takes over
Angela Merkel, the leader of Europe’s biggest economy, will be stepping down this year as Germany’s Chancellor, a post she has held since 2005
But what does it mean?
Several Asian countries are experiencing a hefty second COVID wave, which prompted Japan to declare a state of emergency and led to new highs in cases in Malaysia, South Korea, Thailand, and China. Containment measures being imposed may lead to social unrest and economic slowdowns. Keep an eye out for commentary from central banks regarding measures to keep their economies afloat.
Meanwhile in Europe, cases continue to rise, and vaccination rates remain low. Lockdown periods are expected to continue, further delaying economic recovery. This week’s EU policymakers are expected to zero in on vaccination efforts and implementation of a recovery plan.
Up next on...
Focus on these:
Economic data will shed light on the state and direction of the global economy this week through the release of Chinese GDP data, retail sales, industrial figures, and multiple Central Banks’ interest rate decisions/commentary
Housing and manufacturing data and initial jobless claims will help gauge the depth of the continuing economic deterioration in America
Monday: Martin Luther King, Jr. Day holiday in the US (stock market closed), China retail sales numbers, industrial production data, Q4 GDP figures, and Eurogroup meeting
Tuesday: Eurozone bank lending survey, economic sentiment results, US Redbook index, Bank of England chief economist speech
Wednesday: Chinese PBoC and Canadian interest rate decision; UK, Canadian and Eurozone CPI; Biden’s inauguration as President of the United States
Thursday: Eurozone leaders’ summit and consumer confidence index, Bank of Japan and ECB interest rate decision and monetary policy statements, US jobless claims, housing starts and Philly Fed Manufacturing index
Friday: Eurozone, UK and US market PMI, UK retail sales figures
What’s an investor to do?
How's Mr. Market feeling? It might be time for Mr. Market to get some rest and take a short nap. Things are getting a bit overwhelming, and Uncle Joe will be here on Wednesday to wake him up.
How come? Poor economic data, weak retail figures, social unrest, a second Trump impeachment, and waiting for the new administration.
What to do? The US faces a political transition during a socio-economic crisis that will be carefully monitored at a global scale. Assuming everything goes according to plan, Mr. Market can resume his socially-distanced party plans as he continues to binge on earning calls and stimulus pumps. While Mr. Market gets his bearings straight, and transitions into a new political environment, it may be a good time to build up positions in recovering sectors and industries favored by the incoming administration in the short-term (i.e. retail and financial sectors) and long-term (i.e. environmental tech and energy, managed care, cannabis, education sectors).
For the curious investor:
Earnings Season: Major US banks lost ground on Friday despite posting better-than-expected results including improving provision and charge-off rates. The financial sector, which has been rallying for the better part of the last month, still has a favorable economic environment due to the Fed’s low interest rate strategy.
WOOF, a ticker or a statement? Probably both. Petco’s aptly chosen ticker was followed by an impressive IPO last Wednesday, raising $864m.
Pandemic synergies: A one-two punch, the Affirm IPO revealed that ~30% of their revenues originate from pandemic champion, Peloton.
Patria Investments, the largest Latin American focused private equity fund (40% owned by Blackrock) is expected to IPO this week under the ticker PAX for those looking for emerging market exposure.
Single and ready to mingle: Bumble’s IPO filing revealed that almost 40% of heterosexual couples met online in 2017. Despite financials looking solid, it also revealed some not so ordinary money movements and risk factors…
This is getting a bit political: Politically pointed funds have been an interesting fad that seems to be gaining traction due, in part, to Trump’s high-profile social media personality. Following the American Conservative Values ETF and MAGA ETF, which invest in companies with the highest GOP donation rates, DEMZ became the first Democratic Leadership ETF following a similar methodology to that of MAGA.
Tesla: Environmentally friendly? Check. Safe? Maybe? Tesla was forced to recall 158k vehicles over concerns that the command touchscreen is at risk of suddenly failing.
PayPal makes history: The company became the first foreign brand to own 100% of a Chinese payment platform after finalizing its acquisition of GoPay.
Talking about China… The Chinese government may be working on a plan to nationalize Alibaba and Ant Group as antitrust investigations into the e-commerce giant continue. Reports have stated the government is laying “anti-monopoly work” that will lead to “better development” and prevent the disorderly expansion of capital. With limited access to information, US investors in Chinese equity should be prepared for rocky weeks ahead.
If you didn’t know, now you know
This past August, President Putin’s most prominent opponent, Alexei Navalny, survived an assassination attempt using poisonous nerve agents and has been recovering in Germany since. The EU and US sanctioned Russia believing the Kremlin to be behind the poisoning given Russia’s history of making critics of the Kremlin “disappear.” This Sunday, Navalny returned to Moscow in hopes of a successful run in the September parliamentary elections and was immediately arrested. It is unclear why he was arrested and how long he will be detained. In Soviet Russia, law breaks... you?
This summary only covers the surface of the conflict. To read more, click here.
What we’re vibing:
The Ringmaster by Bakermat - The best of vibes, this album is upbeat, jazzy, and fun. Perfect to pump that good mood – or crank out a newsletter.
Some good news everyone!
If I only had a heart, EU approves sale of first artificial heart
Cycle the Soul of America, a coast-to-coast bike path is in the works
The world’s first zero-carbon and pollution free city underway in Saudi Arabia
Don’t keep all this goodness to yourself. Share WTM with one friend who needs to read this today! 😁
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