Morning Minutes





The first day of trading in 2021 is seeing stocks and commodities surge upward in a New Years Rally as market participants return from holidays with optimism about the coming year. While COVID-related lockdowns continue, investors appear to be trying to look over the valley to a potential reopening recovery later in the year, particularly as vaccine rollouts accelerate.

Political news has been dominating the headlines this morning. Over in Europe, the long Brexit saga has finally been resolved with the UK leaving the EU with a new trade relationship in hand over the holiday weekend. A relief rally appears to be underway this morning on both sides of the English Channel with the FTSE is up 2.7% today while the Dax is up 1.1%. In comparison, Asia-Pacific markets were mixed with the Hang Seng climbing 0.9% and the Nikkei falling 0.7%.

In the US, the final fallout from the US election is in focus this week. Yesterday, Nancy Pelosi was confirmed for another term as Speaker of the House of Representatives in a 216-209 vote, reminding investors that the Democrats have a smaller majority in the House to work with this time. Today the runoff election for two Georgia Senate seats is being held. If the Democrats are able to take both senate seats from the incumbent Republicans, it would give them half of the upper chamber with the incoming Vice President Harris as speaker holding the tie-breaking vote. Also this week, the Electoral College votes for President are scheduled to be read and confirmed by both chambers. While Joe Biden is still expected to be confirmed as President, a sizeable minority of Congresspeople are expected to contest the results.

The bottom line of all this for investors is that even if the Democrats manage to take over control of the Senate along with the House of Representatives and the White House, their majorities are very small. This means that as we saw with the recent fiscal stimulus talks, US politicians may still have to work together to get anything done and the more extreme elements of new initiatives are likely to get chiseled away in negotiations. Markets appear to be pleased with the potential for gridlock along with the potential for economic recovery as US index futures are up 0.5% this morning.

The US Dollar is in retreat to start 2021 igniting rallies in other currencies particularly a 1.3% gain for the Euro, a 2.1% rally for Gold and a 3.6% surge for Silver. Commodity prices are mixed to start the year with Copper climbing 2.1%, but Brent Crude flat and WTI Crude Oil down 0.5% ahead of today’s OPEC meeting.

Today’s economic calendar is dominated by Manufacturing PMI reports which have been mixed. Japan climbed back above 50 into expansion territory, while Switzerland and the UK beat expectations. Germany, France, China and Australia held well above 50 but came in short of street estimates. Canadian Manufacturing PMI (previous 55.8) and the US Markit Manufacturing PMI (previous 56.5) are due at 9:30 and 9:45 am EST respectively, followed by US construction spending at 10:00 am EST (street 1.0% vs previous 1.3%). It’s a busy week for economic news, headlined by US ISM Manufacturing PMI on Tuesday, US ADP payrolls and overseas Service PMI reports on Wednesday, the US ISM Non-Manufacturing PMI report on Thursday, wrapping up with US Nonfarm payrolls and Canadian employment on Friday.

Quarterly earnings start to roll out in a couple of weeks, but we could see some preannouncements (positive or negative) starting this week, particularly related to sales or production numbers. Tesla Motors, for example, announced overnight that it produced 499,550 vehicles in 2020, just short of its 500,000 target.

SIA Wealth In the Media

Chief Market Strategist appeared on BNN Bloomberg recently to discuss relative strength in current markets and the outlook for early 2021. A replay link is below.

Commodities have been the stronger relative performers in the last three months: SIA’s Cieszynski

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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