The European and US stock futures are trading lower on the final day of the week. This is despite the fact that the market players have had an assurance that their addiction is likely to be fulfilled, by way of another stimulus package hit. Remember, the main reason that we have seen so much strong recovery in the US and in Europe is mainly due to the two main factors: dovish monetary policy and unprecedented stimulus support.
The US Treasury Secretary, Janet Yellen, delivered the biggest message of stimulus assurance last night. Basically, she left no doubts out there that the US economy will not see another stimulus. In her message, it was clear that if the US wants to have a robust recovery, then it is essential that lawmakers pass another round of stimulus. That is because only another relief package could restore the full strength.
The Treasury Secretary has admitted that the US economy is experiencing much stronger growth than the government’s expectation. She could be making reference to the US retail sales data, which came in four times better than the forecast this week, but yesterday’s US Weekly Jobless claims numbers were underwhelming. This demonstrates that the US still has a long way to go to recover from the coronavirus damage.
Yellen has laid out a strong case for the lawmakers to not hesitate to execute on Biden’s $1.9 trillion stimulus package. She pointed out that 15 million Americans are behind their rent payments. Twenty-four million adults and 12 million children are still struggling to get enough food. In addition to this, small businesses are failing at a very fast pace.
One important debate which is taking place is that another round of stimulus cheques is likely to fuel another round GameStop stock frenzy mania. After all, all that happened around GameStop stock was chiefly driven by the retail traders, and most of them had never participated in the stock market in the same way before. If another round of stimulus cheques becomes a reality, Americans will likely invest that cash back in the stock market. This means that we will see another episode of stock mania soon.
It is also essential to mention that not all of the stock mania was driven by traders who used their stimulus cheques to buy stocks. The reality is that today we do have more stock traders than ever before, and that is mainly because of low brokerage fees and more user-friendly stock investment platforms. All of this has made the stock investment arena a lot easier to use than anything else.
Oil and Geopolitics
On the geopolitical front, we had more positive developments out of the White House yesterday as the Biden administration put the US economy on a more sensible path. The administration made it clear that they are ready to have talks with Iran over its nuclear programme. The hope among investors and traders is that the US will restore its agreement with Iran which it had under former President Barack Obama.
Of course, the conversation on this topic is likely to bring higher volatility to the oil market as Iran will be able to sell its oil on the open market without any issues like before. This means more supply on the market, and at the same time, Iran isn’t likely to comply with OPEC’s supply target as the country hasn’t been able to sell its oil on the market for a long period.
One important factor to keep in mind here is that fossil fuel’s lifeline may be limited. The world is increasingly moving away from fossil fuel so massive oil revenues like before may become a sweet memory in the coming period.