We're holding up so far.
We are flirting with disaster at the 3,420 line but, so far, it's holding up on endless promises of endless stimulus – currently over 10% of our GDP ($2Tn) is on the table to be pumped into our economy in the last 2 months of the year – just like we did in Q2 and that gave us a 20% pop in the S&P, from 3,000 in late June to 3,600 at the end of August. The question now is, can $2,000,000,000,000 give the markets another 20% boost or is it only enough to fill the hole that's been blown in this economy by the Covid Crisis?
Nancy Pelosi said she hoped that fresh stimulus spending would be retroactive, although Republican Senate Majority Leader, Mitch McConnell has warned the White House against a bigger Democrat-led deal before the election. The administration said its offer is now up to $1.88Tn, below the $2.2Tn Pelosi has pushed for. “The rise in yields suggests that the market thinks a stimulus deal will be forthcoming and that the Democrats are set to take both the presidency and the Senate at the Nov. 3 election,” said John Hardy, chief foreign-exchange strategist at Saxo Bank.
All this stimulus talk has sent the Dollar down over 2% since September and the S&P, which is priced in Dollars, is up 6% and Oil is up 10% and Gold is up 4% and we'll see if that 92 line holds up again as we print another $2Tn. It should as the rest of the World is still in bailout mode as well with the ECB meeting next week to discuss policy into their Winter Holiday.
European Central Bank President Christine Lagarde said the unexpectedly early pickup in coronavirus infections is a “clear risk” to the economic outlook, in a sign that policy makers are gearing up for more monetary stimulus. The remarks were broadcast hours after ECB chief economist Philip Lane told Germany’s RTL that while the virus might still be contained, “we have to prepare for worse scenarios” if it can’t.
“Most scientists in the euro zone were expecting the resurgence of the epidemic in November or December, with the cold,” Lagarde said in a pre-recorded interview with France’s LCI on
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