Only the second full trading week of the year, and there’s plenty to keep markets on their toes.

Besides the world’s struggles with the Covid-19 pandemic that blanket market sentiment, here are some key events to look out for over the coming days:

  • Monday, 11 January: Key Fed officials may offer clues on asset purchasing pullback this week
  • Wednesday, 13 January: Democrat-controlled House may vote to impeach Trump, again
  • Thursday, 14 January: Biden unveils stimulus plans, Fed chair Powell speech
  • Friday, 15 January: JPMorgan kicks off US earnings season

 

Monday, 11 January

Given the forward-looking nature of the markets, investors have begun pondering when might the Federal Reserve begin easing up on their asset purchasing programme, which has been a major supportive element for financial markets since the pandemic. Starting Monday, various key Fed officials are scheduled to offer their respective economic outlooks over the coming days, culminating in Fed chair Jerome Powell’s webinar appearance on Thursday.

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Considering that 10-year US Treasury yields are already at their highest levels since March, the mere hint of a pullback in the Fed’s asset purchasing programme could trigger another yields spike, which could come at the expense of the non-yielding Gold.

 

Wednesday, 13 January

With the chaotic scenes from last week’s Capitol breach still fresh in the world’s mind, Democrats are moving to impeach outgoing US President Donald Trump. That is, unless Vice President Mike Pence and the cabinet remove Trump first by invoking the 25th amendment, which appears unlikely.

While this could be mere political drama which markets are more than willing to ignore, it still presents a risk that prudent investors must continually monitor.

 

Thursday, 14 January

The reflation trade could be given fresh legs when President-elect Joe Biden outlines plans for “trillions of dollars” in added US fiscal stimulus. This would be a much-needed boost, especially in light of last Friday’s surprise contraction of 140,000 jobs in the December US non-farm payrolls report.

It remains to be seen which sectors would benefit the most, but Gold prices could see a pickup on heightened expectations for stimulus-fueled inflationary pressures, while US stocks may well ride higher on such optimism.

 

Friday, 15 January

The US earnings season will kick off with JPMorgan leading the way once more. Banking stocks are back in vogue, as investors anticipate more fiscal stimulus as well as an extended ultra-accommodative policy stance by the Fed. The S&P 500 Financials Index has already gained 4.65 percent so far in 2021, making it the third best-performing sector on the benchmark index, behind Materials (+5.68%) and Energy (+9.31%).

Although the Q4 financial results that will be released over the coming weeks are backward-looking in nature, investors would be paying more attention to the business outlooks for these companies. Commentaries that harbour a more positive performance in the year ahead could spell more upside for share prices.

 

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