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Hello. U.S. futures are slightly higher today, but political risk hangs over markets as Democrats are determined to kick President Trump out of office ahead of Biden’s inauguration next week, putting in place a impeachment vote for tomorrow.
Meanwhile, Corporate America is dead on the responsibility of President Trump and his allies in Congress for last week’s murderous insurgency on Capitol Hill. Lest you think it was a one-time event, the FBI is now a warning he received information for further armed protests on or before January 20.
Let’s see if we can find some more bullish news by checking out what’s moving the markets.
Market update
Asia
- The mainAsia Indexare much higher in afternoon exchanges with the Shanghai Composite high2.2%.
- Taiwanese giant chip TSMC is ready to report Thursday, a huge profit beating, analysts predict, as contract orders of Apple keep coming.
- the Listed on Nasdaq Chinese video platform Bilibili filed a request secondary registration in Hong Kong, CNBC Reports, because the uncertainty of delisting weighs on these companies.
Europe
- theEuropean scholarshipsrebounded at the start of exchanges with theStoxx Europe 600 high 0.3% outdoors.
- The euro area economy is heading towards a double dip recession, analysts at UBS and JPMorgan Chase prevent, while the lockdown measures drag on.
WE
- the American Futuresare flat, but rising. This is after the three main exchanges ended in the red with the Nasdaq of 1.3%.
- Tesla and Twitter were the biggest losers yesterday, falling 7.8% and 6.4%, respectively. Facebook also was off 4%. The latter two have been struck by growing fears of stricter antitrust review on social media giants by regulators on both sides of the Atlantic.
- Run it dollar? You may want to rethink this business, Morgan stanley warns, citing the uncertainty of US monetary and fiscal policy and the rising inflation risk.
Somewhere else
- Goldis in place, exchange $ 1,860 / ounce.
- thedollar is taking a break from her five-day surge, a good sign for the stocks.
- Grossis on the rise, with Brent trading $ 56 / barrel.
- Bitcoinis in place 9% in the last 24 hours after a bear market plunge sent to $ 30,305. Down 25%, up 9%. It looks a lot like an asset bubble.
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Turning
This is only the seventh trading session of the year, and yet there is enough evidence to say that we have reached a turning point. This is the valuation of Morgan Stanley CIO Lisa Shalett who, in a note to investors yesterday, said that last week’s blue sweep in Georgia will shake up the stock, bond and currency markets for the foreseeable future.
We’ve seen the Treasury market wake up from the dead before. The yield on ten-year Treasury bills has risen since Georgia’s Jan.5 runoff as markets provide additional stimulus to businesses and families battered by COVID. Morgan Stanley is now forecasting between $ 1,000 billion and $ 1.5 trillion in additional stimulus bonuses by the 2022 midterm elections; Goldman Sachs calculates a more modest increase of $ 750 billion.
Regardless of the number, one or two more rounds of stimulus make reflation a much more likely scenario in 2021. More stimulus means more deficit spending and a surge in GDP. Both of these forces will drive up prices, Shalett points out, and this could put the brakes on preferred trade for investors in 2020.
“In the stock market, reflation is likely to stimulate rotation into cyclical and smaller-cap stocks and move away from expensive long-term assets, especially tech megacap stocks,” she writes.
Shalett, of course, isn’t the first to warn of the big spin. It’s a narrative since November, but one that has really picked up over the last week since the vote in Georgia.
Now, it’s not like we should expect to see an exodus in tech stocks as there is still a lot of growth to be found in FAAMNG trading. Yet most of these names – Apple, Netflix, Amazon and Microsoft – have been down since the start of the year. And reflation, in general, is a headwind for growth stocks.
So how do you play this? Shalett offers this trick:
“Consider adding cyclicals with valuation support in sectors such as finance, industrials, materials, energy, commodities, infrastructure, transportation, consumer durables and consumer discretionary . Use long-lived assets such as high-tech, high-value stocks as a source of funding.
Perhaps this is why so many investors bailed out Bitcoin this weekend. Taking those profits off the table and reinvesting them in value stocks would be a very 2021 move.
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There are undoubtedly more scores of Shakespearean characters worthy of an article on Bull Sheet. Who did I leave out? Let me know. You have my email below.
Oh, and if you can’t get enough of Shakespeare, I highly recommend James S. Shapiro Shakespeare in a Divided America.
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Have a very good day everyone. I’ll see you here tomorrow… Until then, there’s more news below.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
As always, you can write tobullsheet@fortune.comor reply to this email with suggestions and comments.
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