Markets await Biden’s Fiscal Package

Market Update: 13 January 2021

  • Recent market volatility has been triggered by the uncertainty surrounding Joe Biden’s likely fiscal package, which is due to be announced on Thursday. Long-dated US treasury yields have been climbing on the back of expectations that Democratic stimulus would lead to inflation. However, Fed speakers have been quick to moderate concerns over a tapering of quantitative easing in the medium term. Consequently, we view recent USD strength as corrective as opposed to indicative of change in the underlying trend, and thus still favour protracted USD weakness in 2021. 
  • Whilst the Democrats may choose to wind back some of Trump’s corporate tax cuts over time, this boost to government revenue will still be spent, and likely on infrastructure so will still create a net capital injection into the economy, and the infrastructure focus will also have a positive effect on commodity prices.   
  • Given the nature of fiscal and monetary stimulus post-COVID and their potential impact on commodity prices, coupled with the relative health of the Australian Balance sheet, we remain positive for the AUD against all major currencies this year. However, the road will be a bumpy one.   
Sources: Bloomberg

Contact the Inside Track Research Team for more info: +61 2 8916 6115

The information contained in this report is provided by Rochford Capital Pty Limited – ACN 143 601 594, AFSL 361276. This report is provided for general information purposes and is solely intended for use by persons who are Australian wholesale clients. To the extent that any recommendations or statements of opinion constitute financial product advice, they constitute general financial product advice only. As such, any advice contained in this report does not take into account your objectives, financial situation or needs. You should consider whether this advice is appropriate for you, and seek independent professional advice before making any investment decision. Past performance is not indicative of future results.