It’s basically been a chop-fest this week as we’ve rolled up and down the risk curve. Equity indices remain stuck in the trading ranges created by the pullback from the post-March highs in the second week of June. The picture in fixed income was rather more interesting as yields softened, with a record low yield for the US 10yr auction and UK shorter dated gilt yields also trading at record lows. Meanwhile gold broke out above $1,800 for the first time in nine years.
Next week sees the start of the second quarter earnings season, a slew of high impact economic data and a key EU summit; but first a word on the economic policies of Joe Biden. To be brief, the market needs to start to factor in the risk of higher taxation and increased regulation. Whilst there are good points – like massive R&D spend, a big boost to clean energy stocks, etc – you must think that in terms of 2021/22 EPS for the S&P 500, the net effect of Biden’s economic policies would be negative. Moreover, there is no sign Biden wants to cleave away from Trump’s protectionist agenda, albeit it would take a different form.
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