Market Update

This week's headline-grabbing event was Donald Trump's impeachment, although it had no discernible impact on equity markets, given his presidency concludes next Wednesday (20 January 2021) with Joe Biden's inauguration.
Ordinarily, political theatrics like this wouldn't sway market strategies, but this time, it's different. With the US economy slowing down, it's crucial for American politicians to focus on approving Joe Biden's substantial $1.9 trillion fiscal stimulus package rather than getting entangled in impeachment proceedings. Given the recent stringent COVID-19 lockdowns, yesterday's (Thursday 14 January 2021) weekly jobless claims data and today's retail sales underscored the urgent need for this stimulus. Initial claims for unemployment benefits surged to 965,000 from 787,000, the highest since mid-August. Continuing claims, a more accurate measure of ongoing US unemployment, also rose significantly, reaching 5.27 million. US retail sales in December fell by 0.7%, reflecting the impact of closed restaurants and stores. The 'control group sales,' excluding sectors like food services and car dealerships, dropped by 1.9%, indicating potential belt-tightening among US consumers. Hence, Joe Biden's proposed stimulus, including $1,400 payments to eligible Americans and paid sick leave, is vital to reignite the economy.
Amid these challenges, some positive indicators emerged. The Fed's Beige Book reported modest growth across the US. The Empire State survey showed ongoing expansion in manufacturing in January. US industrial production in December rose by a higher-than-expected 1.6%, with November's figures revised up to 0.5%.
Furthermore, despite market concerns about inflation, US CPI inflation remained stable at 1.4%, affirming our consistent stance against imminent inflationary pressures. Fed Chair Jay Powell reinforced this view in a recent speech, emphasizing that it's not the time to consider tightening monetary policies.
In the corporate sector, JPMorgan started the US quarterly reporting season on a high note, posting a record fourth-quarter profit of $12.1 billion, a 42% increase from last year. This surprising performance may set the tone for other companies reporting better-than-expected profits.
In the UK, November's GDP data showed a 2.6% contraction, a better result than anticipated despite lockdown restrictions. This positive outcome hints at a potentially improved Q4 GDP reading next month, possibly averting a double-dip recession.
Looking ahead to the upcoming week, the US will have a shorter trading week due to Martin Luther King Day on Monday (18 January 2021). The key event will be Joe Biden's inauguration on Wednesday. Data-wise, there will be releases of US, UK, and Eurozone PMI data, US housing figures, weekly US jobless claims, UK, and Eurozone CPI inflation data, UK, and Chinese retail sales data, Chinese Q4 GDP, Chinese industrial production, and an ECB monetary policy meeting.