December 21, 2020

Stimulus Deal Done But Stock Futures Trade Lower

Stimulus Deal Done But Stock Futures Trade Lower

Stock futures are trading lower even though we have had two pieces of good news that should be supporting the sentiment. Firstly, the US lawmakers have finally agreed on a second stimulus package worth $900 billion, after dragging their heels for months. There is no doubt that the US economy has been in desperate need of further stimulus for a long time, and without the current outcome, things would have been a lot more painful for the US economy. Even the Fed pushed the lawmakers in Washington with various warnings and highlighted the importance of a second stimulus aid package for the US economy. Now that we do have the second stimulus aid package, it should relieve some pain for the economy. But what the government needs to make sure is that it doesn’t make blunders like the last time when it sent cheques in the name of dead people.

Secondly, we have Moderna’s coronavirus vaccine going into distribution.  Pfizer’s vaccine has been in distribution for some time now, and front line workers and the most vulnerable are already getting it. But with Moderna’s vaccine also being rolled out in the market, more people should be able to get the vaccine soon.

Spreading Like Wildfire

However, the reason that the stock futures are failing to react positively to all of the above news is that there are concerns about a new strain of coronavirus virus in the UK, which is spreading much faster than previously thought. Over the weekend, the UK’s Prime Minister, Boris Johnson, has put more restrictive measures on the capital city. The city of London has entered into tier-4 lockdown, and this means everything shuts down now. In addition to this, several countries have banned flights from the UK due to the rise in coronavirus. Of course, the coronavirus situation is also becoming even worse in the US as well. Basically, investors are paying more attention to the short-term deterioration in the coronavirus situation and forgetting that we have a coronavirus vaccine, which will have a much positive influence on the upcoming quarter’s economic data.

Good as Gold

In terms of commodities, gold prices have crossed the 1,900 mark, and the move is primarily driven due to the second stimulus package. Gold prices are now once again trading at a six-week high, and the gold prices may likely continue their upward trend towards to the 1,950-price level. Another important piece of news to keep in mind is that the Fed confirmed last week that it is no rush in changing its monetary policy, i.e, changing asset purchase programme, or altering its interest rate policy. As long as the Fed doesn’t move a muscle with their monetary policy, the dollar weakness is likely to continue, which is good for the gold price.

Bitcoin Crosses $24K

As for the crypto king, Bitcoin, it crossed the 24K price level earlier today. The hope is that this uptrend will continue to push the Bitcoin price towards the 30K price level. However, before we approach this, the price is likely to face resistance at 25K, a psychological resistance level. The fact about Bitcoin is that the love and hate relationship is very much like the early days of Tesla, meaning whether one likes it or not, Bitcoin finds a way to be in your face. And now, there is strong evidence of corporate and institutional interest in Bitcoin despite all the famed volatility.