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U.S. stocks are expected to start the quarter in positive territory after President Joe Biden rolled out his $ 2.3 trillion infrastructure plan. Biden described it as a “unique investment in America” in a speech on Wednesday.
Investors will closely follow key economic data over the next two days, including a manufacturing report later Thursday and non-farm payrolls on Friday, when markets in the United States and Europe are closed for the Good Friday holiday. .
The US dollar DXY,
Also remains the focus of concern, as its recent rebound has raised concerns among stock market bulls. However, in our call of the dayCiti strategists have argued that US stocks may even outperform as the dollar rally continues.
Citi forex strategists noted that the benchmark DXY – measuring the value of the dollar against a basket of currencies – was up 4% since mid-February and expected the rally in the U.S. dollar continues, citing the rapid deployment of the U.S. COVID-19 vaccine in the near term. and stronger fiscal stimulus in the medium term.
But the bank’s global equity strategists said that didn’t necessarily mean stocks were about to fall, as history may suggest.
“A stronger dollar can be a drag on risky assets, although it is not fatal if the global economic recovery continues,” they said.
Citi’s three-step “dollar smile” model shows a rise in the dollar and a slowing global economy in March 2020, then a fall in the dollar and an expanding economy in the second half of last year. He said now was the time for Step 3, which would see the dollar rise and the economy grow.
Stage 1 saw risk appetite plummet as markets assessed a global slowdown with the dollar becoming a safe haven currency, while in stage 2 risk appetite recovered with the improved economic outlook and the weaker dollar.
“Then the US dollar starts to move up to the right of the smile. The global economic recovery continues with the United States leading the way. T-bill yields rise further as markets contemplate potential Fed rate hikes, ”he said. “This strategy is starting to work now,” added the Citi team.
Citi’s strategy for Phase 3, which it says is currently unfolding, advises investors to overweight US and Japanese stocks, if the yen is hedged, but underweight emerging market and UK stocks. As for sectors, the team is overweight Industrials, Financials and Information Technology and underweight Consumer Staples, Materials and Communications Services. Investors should also consider taking profits on commodities.
As the dollar continues to rise – to complement the “ dollar smile ” – it will begin to “dampen risky assets,” the team said, adding that it was too early to call the next market bearish but that investors should be more careful. .
The team said this was a “simplistic strategy” based on previous periods when the dollar rose alongside global economic expansion and noted other themes, such as rising bond yields and falling. value rotation, which can deliver conflicting messages. “Nonetheless, our analysis should give a good idea of how investors might factor a rising US dollar into equity portfolios,” Citi said.
Table
This chart from LPL Financial shows that April has always been a great month for stocks, in fact it was the best month in the last 20 years and the second best since 1950. Chief Market Strategist Ryan Detrick said the shares had closed higher in April in 14 of the past 15 years.
Source: LPL Research, FactSet
The steps
YM00 U.S. Equity Futures Contracts,
ES00,
YM00,
pointed higher earlier Thursday following Biden’s infrastructure speech. European and Asian stocks were also supported by the proposed infrastructure spending, with Asian indices making modest overnight gains and the Stoxx 600 SXXP,
up 0.4% at the start of the session.
The buzz
Apple AAPL technology giant,
will use TSLA from electric car maker Tesla,
batteries to store energy for a solar farm in North Carolina, according to a report from The Verge.
Chinese electric vehicle manufacturers Nio NIO,
and XPeng XPEV,
both reported big gains in first quarter shipments early Thursday.
Frontier Group Holdings, the parent company of low-cost carrier Frontier Airlines, said its initial public offering would cost $ 19 per share, the low end of its price bracket.
Pharmaceutical company Johnson & Johnson JNJ,
acknowledged on Wednesday that a batch of its COVID-19 vaccine produced by one of its manufacturing partners “did not meet quality standards,” and said it would provide more experts to oversee production.
Miley Cyrus donates a total of $ 1 million in shares in partnership with Square Inc.’s SQ,
Cash App, the singer tweeted Wednesday.
Cannabis exchange-traded funds are taking advantage of the news that pot is now legal in New York state, with a higher overspend than others.
Netflix NFLX,
has struck a deal for two sequels with director-writer Rian Johnson’s “Knives Out”, with the streaming giant due to pay nearly $ 450 million, according to reports.
Random readings
10 stories that sound like April Fools’ pranks but aren’t.
The so-called Covidiot campers pitch tents a few meters from the edge of a ruined cliff.
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