After slipping the previous week, major U.S. stock indexes added to their solid nine-month gains last week, with major indexes reaching fresh all-time highs as Joe Biden was sworn-in as the 46th president of the United States without violent protest. Optimism over earnings results and the U.S. political transition helped to lift the NASDAQ about 4%, the S&P 500 2%, and the Dow less than 1% last week.
The major indexes moved higher for the week, hitting new intraday highs on Thursday before a pullback on Friday. Investors continue to balance worsening coronavirus news with the proposed $1.9 trillion stimulus package. The hope of good news from Johnson & Johnson regarding their vaccine may have kept the balance tilted in favour of risk assets as we saw stocks set new highs again.
This week will shed some light on company earnings and fundamentals, with over 23% of the S&P 500 releasing results. The S&P 500 is currently trading at almost 23 times this year’s earnings. We know fundamentals drive long-term trends and that investor behavior drives price. The early-stage bull market continues on the back of dovish fed policy and the promise of renewed fiscal stimulus to mitigate the ongoing effects of the Coronavirus pandemic.
Given that view across global markets, the GoNoGo Asset Class Map shows that the major themes remain unchanged. Risk assets are still in favour, with equities, commodities, and cryptocurrencies in “Go” trends, even as Bitcoin rose to nearly $38,000 on Tuesday before correcting sharply and briefly dropping below $29,000 on Friday.
The takeaway remains the same as it has been for several weeks. Equities, commodities, and the cryptocurrency markets continue to post gains in well established “Go” trends.
Panel 1 – Global stocks continue in the “Go” trend now in place for several weeks. SPDR® S&P 500® ETF Trust seeks to provide investment results that correspond generally to the price and yield performance of the S&P 500 Index. It is a diversified large-cap U.S. index that holds companies across all eleven GICS sectors.
Panel 2 – Government bonds, continue to paint “NoGo” bars, although the downward trend conditions have weakened, shown by pink bars last week. $IEF tracks a market-value-weighted index of debt issued by the US Treasury with 7-10 years to maturity remaining.
Panel 3 – Commodities are a “Go,” but showing slight weakness this week in the form of paler aqua bars. $USCI tracks an equal-weighted index of 14 commodity futures contracts and holds at least one precious metal, industrial metal, energy, livestock, soft, and grain commodity.
Panel 4 – The US Dollar remains in a “NoGo” trend this week. The string of weaker pink bars representing the countertrend rally resolved lower this week and returned to purple bands to close the week. $DXY is an index of the value of the United States Dollar relative to a basket of foreign currencies.
Panel 5 – Bitcoin continues in a “Go” trend but is showing some weakness as price consolidates after its impressive run.