Biden’s opening infrastructure offer, ADP and Pending Home Sales, IMF reports dollar reserves drop, bitcoin rebounds off Goldman news

Investors appear to have already priced in President Biden’s “Build Back Better” plan which will come with tax increases.  This afternoon’s infrastructure and tax plan will start as a four-part, eight-year plan totaling USD2.25 trillion.  America needed an upgrade and the timing is perfect as the Biden administration strives to become more competitive with China.  The US will invest in domestic manufacturing, transportation, electric vehicles, R&D, many environmental issues, and child/elder care.

Lengthy rounds of negotiations could drag on for months, but Wall Street is confident that core components of Biden’s infrastructure vision will at the very least get passed through via budget reconciliation.  The big debate amongst Republicans and Democrats will fall on tax increases, but it seems that will not be a dealbreaker.  The Trump tax cuts are going away and that was somewhat expected even before COVID.

Tax increases are the exclamation point to the end of fiscal aid that will get pumped into the US economy.  The White House also wants to provide a second package on social measures, quality of life, universal pre-k,  free community college, making the child tax credit permanent and paid family leave, but that probably will struggle to get much support from Republicans.  The cyclical rotation is not over, but definitely seems to be taking a break and that is helping send some investors back into technology stocks.

US Data

The ADP jobs report showed the private sector added 517,000 jobs, slightly less than forecast but still the best gain since September.  This doesn’t change optimism building up for Friday’s nonfarm payroll report.  The consensus is for NFP Friday for 650,000 jobs to have been created in March, but many are anticipating a strong beat that could top one million.  Too many states have been reopening ahead of schedule and with the population quickly getting vaccinated, employers have been rushing to fill positions.  Leisure and hospitality jobs are going to quickly return as every millennial and senior citizen will want to travel/vacation early and often this summer.

The housing market is cooling, while inventories remain low, many Americans are starting to balk at elevated prices.  Pending homes sales in February plunged 10.6%, the sharpest decline in almost a year.  It is unclear how many Americans will go back to the big cities, but further declines in contract signings could continue to happen.  February was not a normal month as a deep freeze prevented many Americans from shopping for homes, so the housing market party could just be taking a short break.

USD

The dollar slumped after IMF data showed fourth-quarter global reserves declined to 59.02%, the lowest since 1995.  It seems FX markets are bound to see a weaker dollar trend.  The US economy has already seen almost USD5 trillion pumped into, much more than USD830 billion seen during the Great Recession, and the Biden administration is close to delivering his second multi-trillion-dollar package.  Money growth for the dollar will only get worse and some long-term investors are now scaling back into their long-term bearish bets.

Bitcoin

Bitcoin turned positive as cryptocurrency traders embrace the news that Goldman Sachs is near offering investment options for bitcoin and other digital coins.  Earlier, bitcoin investors grew nervous after news that an iOS user got scammed with a scam app on the Apple Store.  Phillipe Christodoulou claims he lost USD600,000, his life savings in Bitcoin.  Bitcoin users are struggling to figure out where is the safest place to store their coins.  Much of the social media platforms warn against keeping cryptocurrencies on exchanges and that provides an opportunity for many scams.

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