Two weeks ago, the U.S. stock market seemed taken with the idea of the Biden administration's promise of trillions in new spending for coronavirus pandemic relief, sending the S&P 500 (Index: SPX) to a new record high.
But that changed last week, after the incoming Biden admininstration announced its stimulus package would total $1.9 trillion, which requires rounding upward to count as "trillions". Worse, the details of the proposal indicate that much of these funds will be spent wastefully. The measure also aims to boost the federal minimum wage to $15 per hour, which while expected to benefit 1.0 million Americans, would contribute to a projected loss of 1.3 million jobs.
Overall, investors were left with the disappointing impression that the Biden stimulus will do little to improve the nation's economic situation, which increases the uncertainty that it can pass in its current form.
That increase in uncertainty led investors to shift a portion of their forward looking focus of investors from 2021-Q2 inward to the current quarter of 2021-Q1, sending stock prices down from the previous week after the details of the Biden stimulus were announced. The latest update to the alternative futures chart based on the dividend futures-based model shows that shift.
In other news, the minions of the Federal Reserve were especially active in trying to shape future expectations, which for them, means little-to-no change in monetary policy in 2021. Here are the headlines we noted for their market-moving potential during the second week of January 2021.
- Monday, 11 January 2021
- Signs and portents for the U.S. economy:
- Oil falls on renewed lockdowns, stronger dollar
- U.S. small businesses to get more cash as pandemic loan program re-opens
- Money markets ramp up bets on U.S. interest rate hikes by 2023
- Fed minions
- Fed's Barkin says workers, not inflation, are his focus
- Atlanta Fed's Bostic: U.S. recovery hinging on vaccine, virus control
- Using China's export growth as a global economic indicator, bigger trouble developing around the world:
- Bigger trouble developing elsewhere in the world:
- Stocks fall from records, U.S. yields continue to climb
- Tuesday, 12 January 2021
- Signs and portents for the U.S. economy:
- U.S. labor market losing speed as COVID-19 spirals out of control
- Brent at 11-month high, yields end flat
- Fed minions really excited about no change in policies:
- Fed won't react if inflation 'tips over' 2%, George says
- Fed's Rosengren says U.S. economy could see robust recovery in second half of 2021
- Fed's Mester says monetary and fiscal support needed to avoid lasting economic damage
- Bostic: Hopeful Biden administration makes economic inclusion "a centerpiece"
- Fed's Kaplan hopes to begin QE weaning this year (MONDAY)
- Jabs equal jobs? Fed sees possible economic boom if vaccine gets on track
- All Fed banks wanted no change to emergency loan rate last month
- Bigger trouble developing in the Eurozone, Japan:
- European Inc earnings seen down 26% in fourth quarter
- Lockdown impact on Germany economy not too severe - Scholz
- Japan's price expectations weaken as pandemic stokes deflation fears
- S&P 500 ends with slightest gain as small caps favored
- Wednesday, 13 January 2021
- Signs and portents for the U.S. economy:
- Fed minions start issuing contradictory statements:
- U.S. economy growing modestly but virus tempers optimism, Fed says
- Fed policymakers push back on QE taper talk
- Fed's Rosengren says U.S. labor markets could stagnate until vaccine is widely available
- Clarida says Fed won't raise rates until its sees 2% inflation
- Fed's Harker says central bank won't let inflation run out of control
- Fed's Bullard sees inflation rising, mum on QE taper
- BOJ minions at odds with themselves, Japanese people:
- BOJ will mull cutting this year's growth forecast: Nikkei
- BOJ seen upgrading next year's growth forecast as stimulus eases pandemic pain: sources
- Japan's households, firms keep piling up cash at record pace as pandemic persists
- ECB minions want to maintain status quo policies, want to regulate Bitcoin:
- ECB's Lagarde pushes back on gloomy forecasts, sticks to recovery outlook (reuters.com)
- ECB's Lagarde calls for regulating Bitcoin's "funny business"
- S&P closes higher with defensive sectors leading gains
- Thursday, 14 January 2021
- Signs and portents for the U.S. economy:
- Biden to unveil plan to pump $1.9 trillion into pandemic-hit economy
- COVID-19, renewed benefits boost U.S. weekly jobless claims
- U.S. business formation tumbles 28.5% in fourth quarter
- U.S. weekly jobless claims jump on COVID-19, renewed supplementary payments
- Chief Fed minion wants to keep QE alive:
- Japanese government wants to continue cranking out stimulus packages, China's growth relies on stimulus:
- Japan may consider further stimulus package for COVID-19-hit economy, says minister
- China growth recovery seen quickening in fourth quarter on policy support: Reuters poll
- ECB minions want to stop cranking out stimulus packages:
- Wall Street ends lower as investors weighed stimulus hopes and bleak jobs data
- Friday, 15 January 2021
- Signs and portents for the U.S. economy:
- U.S. retail sales fall again in December
- Biden unveils plan to pump $1.9 trillion into pandemic-hit economy
- U.S. manufacturing output accelerates in December
- Fed minions get in groove with "super-easy" policy":
- Fed to stick to super-easy policy amid economic 'lull'
- Fed's Kashkari sees pandemic hampering activity through all of 2021
- Bigger trouble developing in the U.K.:
- Positive signs seen in Japan:
- ECB minions hint Euro banks' losses are bigger than claimed:
- Euro zone bank damage from pandemic limited so far, ECB's Enria says
- ECB's Stournaras: Many euro zone banks underestimate credit losses from pandemic
- Wall Street closes lower as banks, energy shares tumble
Want a second opinion on what the big news items of the past week were? Barry Ritholtz delivers the positives and negatives he found in the markets and economics news the way only he can!
Also, if you ever need to put a picture together of events that influenced the U.S. stock market, check out the earlier entries of our S&P 500 chaos series. Political Calculations is your curated resource for market history in near-real time!