SPX: post-election reality check
The post-election reality check was evident on the US equity markets during the previous week. Although the first week was marked with euphoria over potential tax cuts, still, the second week was marked with concerns over the rising US treasury yields. The S&P 500 started the week at the level of 6.005, but ended it at 5.870. A specific hit came from the pharmaceutical industry, after the appointment of R.F. Kennedy Junior as a leader of the US Department of Health and Human Services in the new administration, who was vaccine-sceptic during the pandemic period. The largest pharmaceutical and biotech companies were traded around 5% lower on this news. The market-favourite largest tech companies were down around 2%. Of course, the only company that gained during the week was Tesla, which was traded around 3% higher on a weekly basis.
The market reaction to a new US administration and potential changes which it can bring to the US macro and geopolitical standing, will most certainly continue in the coming period, as analysts are noting. In this sense, further volatility on the equity markets might be expected. Still, aspects of Feds influence should not be overseen. Regardless of current post-election hype, the Fed is the one which holds the strings of the US economy, and markets are still very sensitive to comments from Fed Chair Powell. His latest view that the “Fed is not in a hurry to cut interest rates” has been priced with a negative sentiment.
The market reaction to a new US administration and potential changes which it can bring to the US macro and geopolitical standing, will most certainly continue in the coming period, as analysts are noting. In this sense, further volatility on the equity markets might be expected. Still, aspects of Feds influence should not be overseen. Regardless of current post-election hype, the Fed is the one which holds the strings of the US economy, and markets are still very sensitive to comments from Fed Chair Powell. His latest view that the “Fed is not in a hurry to cut interest rates” has been priced with a negative sentiment.
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