Market Outlook: Stocks rally as Biden becomes president, ECB meeting ahead

Stocks are on the move again with US markets breaching fresh record highs after Joe Biden was inaugurated the 46th president of the United States. The S&P 500 yesterday added 1.4 per cent to 3,851, propelled by a strong day for big tech as Netflix rallied 16% after a strong set of Q4 earnings that seem to bode well for its FAANG peers. The Nasdaq rallied almost 2 per cent but gains for small caps were more muted as the Russell 2000 rose by only 0.42 per cent. Asian markets followed the strong handover from Wall Street. European markets were a little timid, not quite picking up the baton and running with it in the same way. The FTSE 100 pushed up towards 6,780 in early trade but opening gains were pared within the first hour of the session to trade flat. Bulls are looking to build some momentum to breach the Jan 14th/15th peaks at 6,802, but reversal on Jan 15th is proving hard to counter for the time being. Rather like watching US politics from afar and being overburdened with opinions about things that don’t really affect us, all that US stimulus is not going to make its way across the pond, directly at least.

President Biden signed a raft of executive orders, a kind of bonfire of Trumpian vanities. But the market attention right now is on whether he can get the $1.9tn stimulus package through and what else is coming over the hill by way of spending after Treasury nominee Janet Yellen said it was time to ‘think big’. Markets right now are trading on enormous amounts of fiscal support and confidence in the Fed not pulling away the punch bowl before we are all totally sozzled. The degree of stimulus delivered will depend a lot on whether Biden is conciliatory and manages to bring some moderate Republicans with him in the Senate, and whether they move to end the filibuster. Doing the latter might make the former a lot tougher. The next few days will tell us a lot about where the new administration wants to take things.