Financial markets/economy

5 Things to Keep on Your Radar in the Coming Week

Posted by MoneyController on 04.02.2021

As Joe Biden is set to take his role as the new President of the United States of The United States on Wednesday, investors worldwide are eager to see how his stimulus plans and pandemic measures will work out. The European Central Bank is scheduled to hold its latest policy meeting, with PMI data from the most important regions around the world will give us a closer look at the economic situation heading into 2021. Below, we lay out five key topics you need to know for the weak ahead.

1. Joe Biden takes office

The recently elected president of the US is about to take the reins of a country heavily affected by the pandemic and facing deep socio-economic divisions. Biden has promised a hefty stimulus package that includes $1,400 stimulus checks to citizens. But analysts remain uncertain as to whether the US can actually afford such an expensive relief plan. Biden’s narrow Democratic majority and the current crisis situation could mean that the package will not go through, threatening a deeper and extended political crisis that could hamper the US market and economic recovery, at least in the short term. 

2. A new US Treasury secretary

Janet Yellen is about to be confirmed by the Senate Finance Committee, just one day before Biden is sworn into office. Yellen previously worked in the Federal Reserve and her confirmation is expected to be swift. She will most likely support Biden’s stimulus package, which she considers “urgent” and believes it is quite possible due in part to low interest rates. Yellen has also confirmed her commitment towards rejuvenating the way the Treasury deals with financial regulations, especially in light of the pandemic. She has stated that Biden’s relief package was a necessity and that tax policy changes should also reflect the current economic climate, particularly among low-income individuals. 

3. Earnings data has investors on edge

Investors are eagerly awaiting earnings reports, hoping for results that point to some sign of recovery in the pandemic-stricken economy. Earnings for S&P 500 companies are expected to decline 9.5% in Q4 of 2020, but are expected to gain 16.4% in Q1 of 2021, according to IBES data from Refinitiv. For now, the outlook remains unclear with many mixed signals. U.S. stocks are at records highs, but the extended quarantines worldwide continue to weigh on the economy. Biden stimulus checks will likely provide a much-needed financial boost, but since the onset of the pandemic began, roughly 9.8 million jobs have been lost. On the eve of the always anticipated earnings reports, investors will soon learn which direction the new Biden economic team will take: more stimulus or increased austerity.

4. European Central Bank meeting

As the ECB is about to hold its first meeting of 2021 this Thursday, policymakers are unclear as to what’s to come over the next 6 months. New quarantines have been introduced within the Eurozone and a new and more lethal COVID-19 strain has been discovered. What’s more, vaccine administration has been slower than expected and several vaccines have had negative effects on certain groups, such as the one Pfizer rolled out. In this context, markets will be expecting the ECB to signal that it’s committed to deploying its 1.85 trillion-euro emergency bond-buying scheme. 

5. Mixed economic data

The first PMI data of 2021 from the U.S., the Eurozone, the UK and Japan is set for release this Friday, but expectations are low. Again, market observers remain pessimistic in light of the new COVID-19 restrictions. On the flip side, U.S. housing numbers are expected to remain strong, with existing home sales remaining strong and historically low mortgage interest rates. And last, numbers out of China are forecasted to show that it may be the only world economy to have expanded in 2020.

With all this in mind, the coming months are likely to remain rocky.

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