US Wrap – Downbeat start to the week

Near-Term Risks on the Rise

Not the best start to the week for stock markets, with nerves potentially creeping in as countries battle the latest severe wave of Covid-19.

A rising number of countries are seeing cases rising rapidly, despite extreme restrictions already being in place. We were warned this was going to be a difficult winter but this may be far worse than most expected.

With political distractions subsiding in the coming week or so, focus may inevitably drift to the situation around the world which could dampen spirits.

Investors are suddenly clinging on to stimulus hopes from the new administration but even that comes with a cost. Yields have been on the rise and while the 10-year is only a little above 1%, it may not take much to spook investors and ignite fears of a taper tantrum.

Fortunately, there’s a lot of Fed speak this week, so ample opportunity to put any nerves at ease.

Tech stocks also aren’t feeling the love today, suffering a backlash in the aftermath of a decisions made following the events on Capitol Hill last week. There have been concerns about the role of social media for some time, with big tech as a whole seen as being too powerful.

And while some will inevitably be pleased with the actions taken, there are a growing number of people on both sides of the divide that are uncomfortable with the power the firms yield which may lead to more aggressive action in the coming months and years.

With earnings season getting underway later in the week, investors may be looking for reasons to be more cheerful at the start of the year, even given the current sky high valuations.

It could be a tough ask with the outlook once again highly uncertain in the near-term, made all the more so by highly contagious new strains of Covid-19.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam