We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
In the Global Week Ahead, Thursday looks to be a big day.
Here is how Scotiabank’s global economics team put the day’s two big political event together.
I like to apply their perspective. Canada is a key U.S. ally. This FX-focused team offers economists like me, based in the USA, a credible, external perspective. On what they are watching.
This Global Week Ahead holds a double whammy for policy wonks, and those playing the “Biden Trades.”
A. President-elect Joe Biden has guided that he will announce the outlines of a stimulus plan on Thursday
Biden has guided that the price tag with be “high” and in the “trillions” and is expected to include plans for US$2,000 stimulus cheques, more generous unemployment assistance and enhanced aid to city and state governments.
One issue is the degree to which the Democrats will support such an aggressive package.
Senator Joe Manchin, for example, initially objected to stimulus cheques that high at about a US$400B price tag, but later indicated that he might be convinced if the amounts were to be targeted.
Targeted means-tested assistance that doesn’t send cheques to millionaires might be the easy and generally sensible way of achieving agreement.
B. On that same day, Fed Chair Powell will speak in a fluid conversation format at a Princeton University event (12:30 pm ET)
He’s likely to generally reinforce the more upbeat take offered by Vice Chair Clarida in published (here) and verbal remarks, but he may have a greater sense of Biden’s fiscal plans by then.
In play is the shift in the policy balance more toward fiscal policy relative to monetary policy and how the Federal Reserve may react over time.
The Fed spent years beseeching Congress to apply more fiscal stimulus and it may be getting it in spades now. Bond markets are already reacting with persistent curve steepening.
Still, the 10-year Treasury yield has only risen toward 1.1% from about ½% at last summer’s low.
Next are Reuters’ Five World Market themes, re-ordered for equity traders.
(1) The “Biden Bets”
One trade is gripping markets in the early days of 2021: reflation — nowhere more evident than in bonds, where U.S. 10-year Treasury yields topped 1.0% on Georgia’s Senate runoff results.
Betting on a fiscal boost under President-elect Joe Biden, investors pushed the 10-year TIPS breakeven inflation rate above 2% for the first time since 2018. Eurozone long-term inflation expectations are near one-year highs.
But COVID-19 is raging and economies gripped with stricter economic lockdowns and fast-spreading variants. Can a pick-up in prices be sustained? Eurozone December inflation was unchanged at -0.3%, pulling the bloc’s bond yields back down. Only one side of the reflation debate will be proved right.
(2) On Friday, Money Center Banks Kick Off Q4-20 Earnings Season
Banks kick off the U.S. corporate earnings season in earnest with JP Morgan, Citigroup and Wells Fargo posting fourth-quarter results on Friday — the first S&P 500 companies to report for that period.
Bank stocks have been on a roll as breakthrough COVID-19 vaccine data encouraged hopes of a potential economic reopening over coming months. Since early November, the S&P 500 banks index has soared some 37% against an 8% rise for the overall benchmark. Earnings for financial companies are expected to have dropped 6.6% in the fourth quarter against a 10.3% drop for S&P 500 companies overall, according to Refinitiv data as of Dec 31.
(3) Where Goes the China Stock Delisting Narrative?
A volley of parting shots in the direction of Beijing will have investors holding their breath until Jan. 20th, when U.S. President Donald Trump hands over the keys to 1600 Pennsylvania Ave.
Since November, audits have been forced onto Chinese firms, trade restrictions have expanded as have bans on transactions over Chinese apps and on investment in Chinese companies, leading in turn to index removals.
China has responded angrily but without action; Biden has stayed silent. The worry is things sour further. Market nerves are evident in the gyrations in Chinese telcos amid the New York Stock Exchange’ double backflip over their listing status as well as in Alibaba and Tencent shares on speculation that bans could be extended to them.
(4) What is the State of the Mainland China Economy?
Upcoming Chinese data, from inflation and trade to credit and money supply numbers, should confirm Beijing has dialed back on most of its pandemic-period easy-money policies by December.
The People’s Bank of China says monetary policy in 2021 will be targeted and flexible. Debt forgiveness and cheap money will be available for small firms. The recent string of corporate defaults also shows the economy is deleveraging.
Rate cuts are over, analysts say, but policy won’t be tightened abruptly. Subtle tightening is already underway via the yuan, up 7% against the dollar in 2020, but even there the central bank has signaled it doesn’t want any excesses.
(5) Keep an Eye on Global Trade Figures
Global merchandise trade will rebound by 7.2% in 2021 after shrinking by a tenth last year, the World Trade Organization predicts. The uptick is already evident in shipping rates, container traffic volumes and freight indexes.
Recent data bode well. U.S. imports are almost back to pre-crisis levels, German November exports rose for the seventh straight month and Taiwan’s December exports hit record highs. Figures from China on Thursday and the Eurozone on Friday will show how their trades fared towards the end of 2020.
Pandemic-related medical gear and goods linked to remote working dominate exports. Chip sales have led export growth in bellwether South Korea. This has also upped demand for copper, iron and other raw materials, benefiting African and South American exporters.
Good news for global GDP, which is closely linked to trade and forecast to expand by more than +5% this year.
Top Zacks #1 Rank (STRONG BUY) Stocks
With big banks kicking off earnings season, I thought to purposefully put up the top three Finance stocks on our #1 list, in order of Market Cap.
(1) Square (SQ - Free Report) : I see a $241 share price, producing a market cap of $124.5B. This, predictably, garners a Zacks Value score of F, but it comes with a Zacks Growth score of A, and a Zacks Momentum score of F.
(2) Goldman Sachs (GS - Free Report) : I see a share price of $290, producing a market cap of $100.3B. This also comes with a Zacks Value score of F, a Zacks Growth score of F, and a Zacks Momentum score of A.
(3) Canadian Imperial Bank of Commerce (CM - Free Report) : This is an $88 a share stock. That makes for a $39.4B market cap. I see a Zacks Value score of C, a Zacks Growth score of D, and a Zacks Momentum score of D.
Note: Square gets a Zacks Growth of A.
The older established firms? Goldman Sachs stock gets a Zacks Growth of F, Canadian Imperial gets a Zacks Growth score of D.
The marked differences in Zacks Growth scores show the FinTech angle being played.
Key Global Macro
The China trade figures look interesting this week. Otherwise, there’s not much flesh on the macro bones this week.
The U.S. political scene will be where the action is.
On Monday, Mainland China’s Consumer Price Index (the CPI) comes out. It is supposed to be up +0.1% y/y. The PPI? Is it supposed to be down -0.8% y/y.
On Tuesday, we get the U.S.D.A WASDA report on agricultural demand and supply. It is a critical report.
On Wednesday, the U.S. CPI comes out. Ex Food & Energy is supposed to be up +1.3% y/y.
The Fed releases its Beige Book, detailing regional economics conditions.
On Thursday, we get China’s exports and imports for December. Exports should be up +15% y/y. Imports should be up a lower +5.0% y/y.
Fed Chair Powell gives a speech.
On Friday, U.S. retail sales data comes out. It could be down -0.2% m/m in December. The details are more interesting here.
U of Mich. Consumer Sentiment comes out. I see a 79.2 for consensus. Still on the weak side.
Conclusion
I looked into the top major ETFs on zacks.com:
The S&P 500 Energy Sector (XLE - Free Report) is up +34% the last 3 months
The S&P 500 Materials Sector (XLB - Free Report) is up +16.5% the last 3 months too
As a benchmark, realize that the broad S&P 500 (SPY - Free Report) is up +11.4% over the last 3 months.
In sum, Energy and Materials sector returns have been soundly outperforming Tech and Health. We haven’t seen that type of rotation in a while. It speaks to confidence in the global growth recovery.
What evidence is there for “Biden Trades”?
Go to the Alternative Energy ETFs tab.
The iShares Global Clean Energy ETF (ICLN - Free Report) is up +57.6% over the last 3 months.
Thursday’s Biden stimulus package ‘news’ has been widely anticipated -- for the last 3 months.
Happy Trading and Investing!
Regards,
John Blank
Will you retire a millionaire?
One out of every six people retires a multimillionaire. Get smart tips you can do today to become one of them in a new Special Report, “7 Things You Can Do Now to Retire a Multimillionaire.”
Image: Bigstock
The Biden Trades: Global Week Ahead
In the Global Week Ahead, Thursday looks to be a big day.
Here is how Scotiabank’s global economics team put the day’s two big political event together.
I like to apply their perspective. Canada is a key U.S. ally. This FX-focused team offers economists like me, based in the USA, a credible, external perspective. On what they are watching.
This Global Week Ahead holds a double whammy for policy wonks, and those playing the “Biden Trades.”
A. President-elect Joe Biden has guided that he will announce the outlines of a stimulus plan on Thursday
Biden has guided that the price tag with be “high” and in the “trillions” and is expected to include plans for US$2,000 stimulus cheques, more generous unemployment assistance and enhanced aid to city and state governments.
One issue is the degree to which the Democrats will support such an aggressive package.
Senator Joe Manchin, for example, initially objected to stimulus cheques that high at about a US$400B price tag, but later indicated that he might be convinced if the amounts were to be targeted.
Targeted means-tested assistance that doesn’t send cheques to millionaires might be the easy and generally sensible way of achieving agreement.
B. On that same day, Fed Chair Powell will speak in a fluid conversation format at a Princeton University event (12:30 pm ET)
He’s likely to generally reinforce the more upbeat take offered by Vice Chair Clarida in published (here) and verbal remarks, but he may have a greater sense of Biden’s fiscal plans by then.
In play is the shift in the policy balance more toward fiscal policy relative to monetary policy and how the Federal Reserve may react over time.
The Fed spent years beseeching Congress to apply more fiscal stimulus and it may be getting it in spades now. Bond markets are already reacting with persistent curve steepening.
Still, the 10-year Treasury yield has only risen toward 1.1% from about ½% at last summer’s low.
Next are Reuters’ Five World Market themes, re-ordered for equity traders.
(1) The “Biden Bets”
One trade is gripping markets in the early days of 2021: reflation — nowhere more evident than in bonds, where U.S. 10-year Treasury yields topped 1.0% on Georgia’s Senate runoff results.
Betting on a fiscal boost under President-elect Joe Biden, investors pushed the 10-year TIPS breakeven inflation rate above 2% for the first time since 2018. Eurozone long-term inflation expectations are near one-year highs.
But COVID-19 is raging and economies gripped with stricter economic lockdowns and fast-spreading variants. Can a pick-up in prices be sustained? Eurozone December inflation was unchanged at -0.3%, pulling the bloc’s bond yields back down. Only one side of the reflation debate will be proved right.
(2) On Friday, Money Center Banks Kick Off Q4-20 Earnings Season
Banks kick off the U.S. corporate earnings season in earnest with JP Morgan, Citigroup and Wells Fargo posting fourth-quarter results on Friday — the first S&P 500 companies to report for that period.
Bank stocks have been on a roll as breakthrough COVID-19 vaccine data encouraged hopes of a potential economic reopening over coming months. Since early November, the S&P 500 banks index has soared some 37% against an 8% rise for the overall benchmark. Earnings for financial companies are expected to have dropped 6.6% in the fourth quarter against a 10.3% drop for S&P 500 companies overall, according to Refinitiv data as of Dec 31.
(3) Where Goes the China Stock Delisting Narrative?
A volley of parting shots in the direction of Beijing will have investors holding their breath until Jan. 20th, when U.S. President Donald Trump hands over the keys to 1600 Pennsylvania Ave.
Since November, audits have been forced onto Chinese firms, trade restrictions have expanded as have bans on transactions over Chinese apps and on investment in Chinese companies, leading in turn to index removals.
China has responded angrily but without action; Biden has stayed silent. The worry is things sour further. Market nerves are evident in the gyrations in Chinese telcos amid the New York Stock Exchange’ double backflip over their listing status as well as in Alibaba and Tencent shares on speculation that bans could be extended to them.
(4) What is the State of the Mainland China Economy?
Upcoming Chinese data, from inflation and trade to credit and money supply numbers, should confirm Beijing has dialed back on most of its pandemic-period easy-money policies by December.
The People’s Bank of China says monetary policy in 2021 will be targeted and flexible. Debt forgiveness and cheap money will be available for small firms. The recent string of corporate defaults also shows the economy is deleveraging.
Rate cuts are over, analysts say, but policy won’t be tightened abruptly. Subtle tightening is already underway via the yuan, up 7% against the dollar in 2020, but even there the central bank has signaled it doesn’t want any excesses.
(5) Keep an Eye on Global Trade Figures
Global merchandise trade will rebound by 7.2% in 2021 after shrinking by a tenth last year, the World Trade Organization predicts. The uptick is already evident in shipping rates, container traffic volumes and freight indexes.
Recent data bode well. U.S. imports are almost back to pre-crisis levels, German November exports rose for the seventh straight month and Taiwan’s December exports hit record highs. Figures from China on Thursday and the Eurozone on Friday will show how their trades fared towards the end of 2020.
Pandemic-related medical gear and goods linked to remote working dominate exports. Chip sales have led export growth in bellwether South Korea. This has also upped demand for copper, iron and other raw materials, benefiting African and South American exporters.
Good news for global GDP, which is closely linked to trade and forecast to expand by more than +5% this year.
Top Zacks #1 Rank (STRONG BUY) Stocks
With big banks kicking off earnings season, I thought to purposefully put up the top three Finance stocks on our #1 list, in order of Market Cap.
(1) Square (SQ - Free Report) : I see a $241 share price, producing a market cap of $124.5B. This, predictably, garners a Zacks Value score of F, but it comes with a Zacks Growth score of A, and a Zacks Momentum score of F.
(2) Goldman Sachs (GS - Free Report) : I see a share price of $290, producing a market cap of $100.3B. This also comes with a Zacks Value score of F, a Zacks Growth score of F, and a Zacks Momentum score of A.
(3) Canadian Imperial Bank of Commerce (CM - Free Report) : This is an $88 a share stock. That makes for a $39.4B market cap. I see a Zacks Value score of C, a Zacks Growth score of D, and a Zacks Momentum score of D.
Note: Square gets a Zacks Growth of A.
The older established firms? Goldman Sachs stock gets a Zacks Growth of F, Canadian Imperial gets a Zacks Growth score of D.
The marked differences in Zacks Growth scores show the FinTech angle being played.
Key Global Macro
The China trade figures look interesting this week. Otherwise, there’s not much flesh on the macro bones this week.
The U.S. political scene will be where the action is.
On Monday, Mainland China’s Consumer Price Index (the CPI) comes out. It is supposed to be up +0.1% y/y. The PPI? Is it supposed to be down -0.8% y/y.
On Tuesday, we get the U.S.D.A WASDA report on agricultural demand and supply. It is a critical report.
On Wednesday, the U.S. CPI comes out. Ex Food & Energy is supposed to be up +1.3% y/y.
The Fed releases its Beige Book, detailing regional economics conditions.
On Thursday, we get China’s exports and imports for December. Exports should be up +15% y/y. Imports should be up a lower +5.0% y/y.
Fed Chair Powell gives a speech.
On Friday, U.S. retail sales data comes out. It could be down -0.2% m/m in December. The details are more interesting here.
U of Mich. Consumer Sentiment comes out. I see a 79.2 for consensus. Still on the weak side.
Conclusion
I looked into the top major ETFs on zacks.com:
As a benchmark, realize that the broad S&P 500 (SPY - Free Report) is up +11.4% over the last 3 months.
In sum, Energy and Materials sector returns have been soundly outperforming Tech and Health. We haven’t seen that type of rotation in a while. It speaks to confidence in the global growth recovery.
What evidence is there for “Biden Trades”?
Go to the Alternative Energy ETFs tab.
The iShares Global Clean Energy ETF (ICLN - Free Report) is up +57.6% over the last 3 months.
Thursday’s Biden stimulus package ‘news’ has been widely anticipated -- for the last 3 months.
Happy Trading and Investing!
Regards,
John Blank
Will you retire a millionaire?
One out of every six people retires a multimillionaire. Get smart tips you can do today to become one of them in a new Special Report, “7 Things You Can Do Now to Retire a Multimillionaire.”
Click to get it free >>