All eyes were on Sunday. The negotiation period between the United Kingdom and the European Union ended and an agreement was not reached. This was already taken for granted, so the markets weren’t scared, but feared that both parties would throw in the towel. Finally, sanity prevailed and the negotiations were extended, although the date of January 1, 2021 is the key to everything and there is no march, time runs inexorably against everyone.
Personally, I still believe that there will be, in one way or another, some kind of agreement, even if it is basic and minimal, among other reasons because neither party is convenient for a total and chaotic breakup. Brussels has always recognized it, Boris Johnson has not.
Here you can see the evolution of the pound sterling.
Thus, this good news (or rather the absence of bad news), together with the fact that the United Kingdom, the United States and Canada have begun the distribution of the Pfizer vaccine against Covid 19, are the catalysts that the Exchanges started well week. And from Wall Street it should also be added that Republicans and Democrats have made progress in their meetings on the issue of fiscal stimulus, as well as that the Fed could announce more measures and that the big Wall Street banks are quite optimistic about it. growth of the country’s economy for the next year, they even venture to say that they expect growth of 6-6.4%.
Meanwhile, the European Central Bank may approve a new increase in its purchasing program (PEPP) in case the economy continues to fail. And it is that central banks continue to be an important safety net for investors and they know that they will not let the markets fall in a medium-term horizon, something else is the specific short-term falls that may arise, regardless of the intensity of them.
The fact that interest rates are at zero means that if investors want to get some return on their capital they have no choice but to turn to equities, since the other options are hardly worth it. It is the axiom that to catch fish you have to get your ass wet, because here the same, whoever wants to have options to earn money has to take risks. In addition, this scenario of low interest rates will still be in force for a long time, at least all of 2021 and 2022. Starting from this premise, interesting sectors are industrial, construction, cars and infrastructure.
Therefore, despite the tremendous rally of the S & P500 since the lows at the end of March (rise above + 62%), it is not an impediment for it to continue being bullish in 2021. You see, looking at history, when a bull market starts, the second year (in this case it will be 2021) tends to be interesting for investors. Furthermore, the Fed’s fiscal and monetary stimulus will be the icing on the cake.
As a curiosity, I comment on two questions:
– Almost all the stocks that make up the S & P500 are already above their 200-day moving average, a sign of strength.
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– There is a company, a Swiss biotechnology company, Relief Therapeutics, which has risen by + 38,000% so far this year. Yes, you read that correctly, it is not a mistake. The company works on a drug for the most serious patients with respiratory failure due to the coronavirus.
On December 23 at 10:30 am, we will be live at the Digital Expansion Meeting to resolve your doubts and questions. Surely there will be questions about what to expect from the Stock Exchanges for 2021. It will be at that moment when I give you my opinion on the matter.
Twitter:@delacruz_ismael
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