BMA Market Insights: RISK-ON in Tech While Fixed Income Remains Steady


Market Snapshot

Mixed market sentiment as the technology-heavy NASDAQ index continues to push higher with futures pointing to nearly a 1% increase at the open while the S&P 500 is nearly unchanged and the Dow Jones is down nearly 0.50% after Merck announced it will be shutting down its COVID-19 vaccine program after poor test results.

In interest rates, the 10-Year UST yield is currently trading at 1.071% and moving slightly lower after recent data from Germany, the Eurozone’s largest economy, pointed to slower economic growth with the possibility of a double-dip recession prompting fears that the U.S. and other developed markets may face the same short-term outlook. 

While the knee-jerk reaction prompted European investors towards a flight-to-safety in U.S. Treasuries, U.S. investors will be keeping an eye on President Joe Biden’s administration to push through a proposed $1.9 trillion economic stimulus plan. The proposed package includes direct checks to millions of Americans, aid to state and local governments, funding for Covid vaccines and testing, a boost to the minimum wage of $15/hour, and enhanced unemployment benefits, amongst other matters.

New LIBOR Fallback Language Takes Effect

Effective today, counterparties that have preemptively elected to adhere to the ISDA 2020 IBOR Fallback Protocol will have covered transactions apply following the permanent cessation of USD LIBOR (or other applicable currency). For derivatives that reference LIBOR, the fallbacks in the relevant currency would also apply following a determination by the UK Financial Conduct Authority that LIBOR in that currency is no longer representative of its underlying market. For USD LIBOR, the fallback will be adjusted SOFR, a risk-free overnight rate.

For additional information, please contact your advisor.

Upcoming Economic Data This Week:

  • Today, on Monday, Chinese President Xi Jinping is due to speak at the World Economic Forum’s “The Davos Agenda 2021” online event. The People’s Bank of China Governor Yi Gang and European Central Bank Chief Economist Philip Lane will also be speaking.
  • Tuesday brings data on U.S. home prices and consumer confidence.
  • Wednesday concludes the two-day monetary policy meeting and the policy decision by the Federal Open Market Committee (FOMC). There will be a briefing by Fed Chair Jerome Powell shortly after the release.
  • Thursday brings a slew of economic data including Q4 GDP, initial jobless claims, and new home sales.
  • Closing out the final week of January on Friday is  U.S. personal income, spending, and pending home sales.