Daily Alert – Friday 8th January 2021: A messy Monday led to a messy week

Mark NugentDaily Alert, Jan 2021

Daily Alert – Friday 8th January 2021: A messy Monday led to a messy week

I said on Monday that it was a “messy start to the year”. Little did I know what was to come. The US Senate race in Georgia was won by the Democrats, giving them a “blue wave” victory by adding the Senate to their majority in the House and, of course, the Presidency. On Wednesday, as Congress tried to approve the election of Biden, Trump’s “stolen election” rhetoric resulted in his supporters storming the Capital resulting in, at the time of writing, five fatalities. Even Trump seemed shocked by what happened and on Thursday he condemned the riots and spoke for the first time of a peaceful transition on the 20th January. The world joined in the condemnation and the enemies of the US gloated.

The markets sailed on regardless, buoyed by the expectation and then the reality of the blue wave. Why? The markets feel the Democrats will be well placed to implement their fiscal ideas (massive expenditure – equities will rise) fuelled by debt (bond price down, yields up).

Risk sentiment was strongly risk-off on Monday and then risk-on to varying degrees for the rest of the week.

As the week draws to a close, US equity indices make new all-time highs. GOLD drops on sentiment and oil rises (on further production cuts). The JPY falls and the commodity currencies rise – all as you would expect. The USD is flat on the week, EUR is up and GBP down.

I did not trade this week due to it being the first week of the year and the multiple risk events. Hindsight says deal of the week was either FTSE100 long or GOLD short (from Wednesday onwards). I cannot see any rationale why anyone would have traded either of those options.

Have a great weekend and I’ll see you on Monday.

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