SENTIMENT

It’s always about the economy when it comes to elections, and the best way to boost the economy is to keep spending.

As promised and forewarned, the Biden administration is now floating proposals of US$3–4 trillion of infrastructure spending with more trillions for more stimulus plans in the weeks ahead.

How much is enough? Our view is they will spend as much as they can because this is the first time that they have control of both chambers of Congress and the White House, with a willing US Treasury Secretary and Federal Reserve Chair who are set on printing and monetising the debt AND with a ready-made excuse.

Massive spending to save the economy and country from the damage of the pandemic. When will you ever get a better reason/excuse that is palatable to the voters than this?

The Biden administration has about 2 years to go before the mid-term elections to increase their razor-thin majority in the Senate. As they say, show me the incentives, I’ll show you the outcomes.

It’s always about the economy when it comes to elections, and the best way to boost the economy is to keep spending. Hold on to your hats!

The Japanese financial year closes on 31 march and sometimes “weird” market movements happen around this time. With the impending closing of accounting books, many Japanese entities and funds will want to reduce their balance sheet usage (by selling out assets) and to lock in the profits and losses for the financial year.

Sometimes, they may even engage in “window dressing” and try to post good “closing prices” for the assets they own and try to get a favourable FX rate (USDJPY, EURJPY) to value their holdings. As such, expect confusing volatility on the last day of trading.

And when the clock turns with the start of a new financial year, investors who have reduced their risk and holdings will need now to deploy their capital for the new financial year. With US bonds having been crushed this quarter, it may start to look attractive to investors who will need to deploy into bonds.

It may sound a little weird to sell into quarter/year end, just to buy back again when the next quarter/year begins but professional investors are humans after all, and have calendar and fiscal year milestones to adhere to.

For those of us who do not have such restrictions, being aware of these market characteristics can often bring to light opportunities that arise in such circumstances.

No notable events.

1. Currencies : Keep short USD and long NZD, & CNH. USDCNH is trading at 6.57+ and has broken above the top end of the 6.45–6.55 range, which has since the start of the year. Caution is warranted, we remain short for now, but will wait for the upside momentum to fade before deciding if we should add to shorts. NZD, on the other hand, continues to recover and is trading above the psychological 0.7000 level. Stay long for now.

2. Commodities : Silver — Support for Silver was at 24.70–80. With Silver now closing below support, further reduction in risk is warranted. With Silver and Gold trading very weak in the past few weeks, exiting longs to move to the sidelines is prudent. While we like the trade in the longer term, price action has been extremely disappointing, and after having been long since mid last year from 17.00+ level, it’s time to say goodbye to this trade for now. If & when price action improves, we will revisit the merits of the trade then.

Key risks: Spikes in US bond yields may lead to a stronger USD and weaken risk sentiment. .

3. Equities :

Equity Index: : Long Nasdaq futures. Despite continued liquidation selling flows, stocks traded fairly well. The end of the quarter is almost in sight. Stay patient.

Key risks : Higher US yields and inflation fears are the key risks.

As of New York Close 29 Mar 2021,

Notable Snippet: Shipping was on the move again late on Monday in Egypt’s Suez Canal after tugs refloated a giant container ship which had been blocking the channel for almost a week, causing a huge build-up of vessels around the waterway. About 15% of world shipping traffic transits the Suez Canal, which is an important source of foreign currency revenue for Egypt.

Notable Snippet: COVID-19 vaccines developed by Pfizer Inc with BioNTech SE and Moderna Inc reduced risk of infection by 80% two weeks or more after the first of two shots, according to data from a real-world U.S. study released on Monday. The risk of infection fell 90% by two weeks after the second shot, the study of nearly 4,000 U.S. healthcare personnel and first responders found. The results validate earlier studies that had indicated the vaccines begin to work soon after a first dose, and confirm that they also prevent asymptomatic infections. The CDC study comes weeks after real-world data from Israel suggested that the Pfizer/BioNTech vaccine was 94% effective in preventing asymptomatic infections.

Notable Snippet: Index provider FTSE Russell gave final approval on Monday for inclusion of Chinese sovereign bonds in its flagship bond index, starting later this year, setting the stage for billions of dollars of inflows into the world’s second-largest economy. Chinese government bonds (CGBs) will be included in the FTSE World Government Bond Index (WGBI) from the end of October and will be phased in over three years, FTSE Russell said in a statement. Pan Gongsheng, deputy governor at the People’s Bank of China, welcomed the move and said in the FTSE Russell release that the central bank would work actively to promote the further opening of the China bond market to international investors.

FX

STOCK INDICES

Phan Vee Leung
CIO & Founder, TrackRecord

Related posts:

Uma flor. Pode ser uma flor. Há poucos dias, sonhei que estava na antiga casa. Era uma tarde, sei que era uma tarde pelo sol que entrava lânguido pela janela. O silêncio, os tapetes e a dupla de…

I have been a skinny person all my life. I do not remember having to bother about calories, or ruthlessly segregate every food item into the Family of a mere Protein-Carbohydrate-Fat-Fibre chart. In…

Why is it impossible to buy complete insurance? (Preferably if you know a lot about economics and health insurance) ANSWER: I would recommend that you visit this internet site where one can get rates…