MLK Day in the US! FTSE 100: -0.33%

European and US stock futures are climbing as investors begin to feel more positive generally. This comes as a result of the tone coming from Biden’s administration who are indicating that they plan to spend much more in order to gain control of the economy and bring it to a place of growth. Janet Yellen who will become the Treasury Secretary has said in the confirmation hearing that it could be “a longer, more painful recession” and there is the risk of “long-term scarring” if the US did not “act big” and quickly pump more spending into the economy. Her stance is firmly in line with President-elect Joe Biden. Biden’s vision for the next round of stimulus is considered to be in the trillions of dollars.

As investors know, the US economy has become very reliant on the monetary policy of the Government, and when they inject funds or even discuss injecting funds, the stock markets rise as a result, no matter what else is happening in the economy. The markets have become somewhat addicted to monetary and fiscal spending. So what might happen to the US stock markets if this fiscal help stops, especially as the stocks are currently massively overvalued? The bulls may not be ready to move higher.

Apart from the stay-at-home stocks, it has been a very hard time for the leisure sector, not least the travel stocks such as the airlines. Yesterday they saw some optimism as Trump mentioned lifting travel restrictions for both Europe and Brazil. However this is a move that Biden is not happy about, and as he is taking office tomorrow, he may well retract this order.

In the meantime, there is no business or leisure travel, and the airline industry is suffering deeply as a result. This can only see a turnaround when vaccination rollouts spread far and wide, and people start to get vaccination passports or stamps. Many countries are mentioning the majority of their vulnerable being vaccinated by Easter, so perhaps this might be the time airlines turnaround as consumers are by now more than ready to travel, and many who have held onto jobs may have disposable income as a result of less spending over the last year.

Tesla has now penetrated China with its Model Y electric vehicle, made in Beijing. As China is the 2nd largest global economy, there is a huge market for electric vehicles, and Tesla must move fast in order to try to get a foothold in the industry. The competition with Chinese EV makers is likely to heat up fast, and it won’t be long before local consumers look to Chinese manufacturers for a cheaper option.

Gold price is taking a breather after yesterday’s rally. The RSI is staying near enough to the oversold area, meaning that the bulls could really challenge the daily 50-day SMA. Meanwhile, Janet Yellen’s comments could really start to push the gold price down as investors move into ‘risk-off’ mode and the dollar index climbs.