It was all about the Georgia run offs this week as the markets began to price in a Democratic sweep for the US. With the Democrats able to control the Senate it means that Biden’s policies will have a much easier path through the US administration. Although tech stocks took a wobble on a prospect of a democratic win the majority of global stocks rallied higher. Why? The worries about higher rates, stricter regulation, and higher taxes have been blown away on the expectations of higher spending. Expect Democrats to now focus on passing large amounts of stimulus which should be a further tailwind for US stocks.

Other key events from the past week

  • USD: Manufacturing PMI’s, Jan 05. December’s manufacturing came in strongly at 60.7 vs 56.7 expected. It was a great report showing strong underlying demand for products and high levels of Q4 US production.
  • FTSE 100: Brexit relief, Jan 06. The FTSE 100 broke out of a key weekly trend line at 6637 on relief that Brexit is finally over for the UK. Will the FTSE 100 reach 7600 before April this year or will COVID-19 shutdowns hamper UK growth?
  • US Oil: OPEC+ Meeting, Jan 05. Russia and Kazakhstan raised output by a total of 75K bpd in February and another 75K in March. However, Saudi Arabia surprised oil markets by announcing a voluntary 1mln bpd cut.

Key events for the coming week

  • USD: Retail sales, Jan 15. The US consumer makes up around 70% of the US’s GDP. Any pick up in retail sales from the last month’s reading of -0.9% will sup-port the US economy and show consumer strength.
  • Gold: ETF buying resumes, Jan 11. XAUUSD fell midweek on the rising US 10 yields but medium term USD weakness should support gold as ETF buying is in-creasing again after November’s drop. Will $1900 prove to be key support for gold?
  • S&P500: Stimulus rally ahead? Jan 12. Will the S&P500 rally higher next week on continued hopes of further stimulus from a Democratic blue sweep? The market is hearing the win as, ‘Spend, spend, spend’.