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Where does the United States begin the Biden era for the global financial market?
Author: 4. Alina Cho
[ 尽管美元指数的走势仍存变数，但机构普遍提升对人民币的预测。摩根士丹利中国首席经济学家邢自强对记者表示，中国出口和制造业资本支出的复苏仍将维持强劲，因此将2021年年底前人民币对美元的预测修正至6.25。 ]
On January 20 local time in the United States, Biden formally entered the White House as president of the United States, and the American stock market reached a new record. The S&P 500 Index, which has been hovering around 3,800 points for the past two weeks, rose to 3,851.85 points led by the technology, communications services and consumer discretionary sectors, a big step toward the 3,900 mark.
In the “Biden Era”, where will the global financial market go?
New Energy Welcomes Good News, Tech Giants Slow Down
The reason the new energy industry chain has been so hot since 2020 is also because “green” has become a global issue.
In accordance with the previously announced plan, Biden promised to achieve carbon-free power generation through the transition to renewable energy by 2035; pledged to invest US $ 2 trillion over the next four years to strengthen America’s clean energy infrastructure; in the next five years, solar cells The number of installed panels has doubled to 500 million units, fuel-based cars will be phased out in favor of electric cars.
The “new powers for China car manufacturing” listed on the US stock market have exploded. For example,idealCars are up nearly 10% in two consecutive business days. In the context of this global development of new energy policies, in the early trading on January 20, after a short-term correction, the new energy sector of A shares began to force once again, new energy vehicles, lithium batteries, lithium mines, etc. they received a large influx of funds. The momentum continued on the 21st and the “Bao Tuan” was temporarily difficult to disintegrate.
Already in December 2020,UBSHe also warned of the skyrocketing share price of electric vehicles: While falling battery costs may bring surprises to the market, the market may underestimate the increasingly fierce competition in the electric vehicle industry.TeslaThe impact of giants like Volkswagen has put some existing companies at risk of losing some of their market share.
In this regard, Lu Jie, chief investment officer at Robeco China, previously told reporters: “The electric vehicle sector remains very promising. According to China’s fourteenth five-year plan, future ownership will definitely increase, but the risks to short term The point is that the valuation of the whole sector has reached a very high level, especially in the downstream vehicle industry. Therefore, we are now more willing to implement midstream and upstream equipment of raw materials and other related companies, and take a more cautious approach. downstream attitude. “
In contrast, promising tech giants in 2020 may face challenges. Fiona Cincotta, an analyst at Jiasheng Group, told reporters that the S&P 500 index rose 16% from 2020 to early December, but if 11 large stocks (mostly tech stocks) are eliminated, the 2020 S&P 500 index will return. Total for the year may already be negative, so the trend of tech giants in 2021 is very important for US stocks.
In Sinkerta’s view, Biden may also pose one of FAAMG’s biggest risks in 2021. FAAMG specificallyFacebooknet,Apple、Amazon, Alphabet andMicrosoft. Biden and his Democratic Party as a whole criticize the growing concentration of economic momentum on the tech giants, and the regulatory threat is obvious. Even during Trump’s tenure, the US Department of Justice.GoogleAntitrust actions launched. Signs of future regulatory reforms, the Dodd-Frank Act for tech companies, or even just talk of breaking up these companies, can quickly end this feast of tech stocks.
In terms of US stocks as a whole, institutions said they should be alert to the risk of weaker-than-expected US fiscal stimulus. Kevin Solomon, an energy economist at Jiasheng Group, told reporters that the stimulus plan is expected to be implemented in the first quarter (or before the end of February). Biden previously stated that he would raise the fiscal stimulus from $ 900 billion to $ 1.9 trillion. but the final amount may also be less than expected.
Renminbi remains strong, wary of US dollar counterattacks in second half of year
Although the “weak dollar” has become a consensus expectation from all walks of life this year, United States Secretary of the Treasury Yellen recently spoke about his position on the US dollar and believed that the value of the US dollar and other currencies should be determined by the market. . The United States will not deliberately seek a devaluation of the US dollar. The Trump administration is in stark contrast. During Trump’s tenure, he often called for lowering the US dollar exchange rate to boost US exports. Since January, the dollar index has continued to rally above 90.
Sinkerta told reporters that in the second half of this year, if inflation expectations continue to rise and the market begins to raise expectations of the Fed’s balance sheet reduction, this may cause the dollar to rise. Furthermore, if global geopolitical tensions escalate again, it may also generate a safe haven demand for the US dollar. Since the current net short position of the US dollar index is close to all-time highs, any turbulence may cause a short hedge in the US dollar.
However, some institutions believe that the Fed is too early to talk about reducing its balance sheet. For example, Standard Chartered believes that the current plan to purchase assets worth $ 120 billion a month has expanded the Fed’s balance sheet to $ 7.3 trillion, which is equivalent to 35% of GDP. The discussion of reducing debt purchases appears to go against the Fed’s promise to “overheat” the economy when it announced its average inflation target framework in the third quarter of 2020. At the same time, in 2020, US companies with investment grade (IG) issued $ 2 trillion in bonds, and the US A-rated credit spread has narrowed to the pre-epidemic level. Without the support of the central bank, this is impossible to achieve, so reducing the balance sheet is “easy to say and difficult to do.”
Although there are still variables in the trend of the US dollar index, institutions generally increase their forecasts for the renminbi. Xing Ziqiang, chief economist at Morgan Stanley China, told reporters that China’s export recovery and manufacturing capital expenditures will remain strong, so the forecast for the renminbi per dollar before the end of 2021 is revised to 6.25. “Due to the recovery of the domestic supply chain and unfulfilled orders, we expect export growth to remain strong in the coming months (excluding a favorable comparison base). Possible additional fiscal stimulus in the United States will support the residents’ income and could also further promote China’s export momentum. “
Supply determines the price of copper, but the trend of gold and silver remains variable
Driven by demand from tight supplies, liquidity flooding, new energy vehicles and semiconductors, LME copper has risen nearly 80% from its March 2020 low. However, after the latest round of financial crisis , the price of copper rose almost 250% between 2009 and 2010. Can copper prices continue their upward trend in 2021?
In this regard, Solomon believes that although the bullish view is mainstream, some potential negative factors should attract attention. For example, after a 1.6% drop in Chile last year, mainly due to supply disruptions in Chile, world production this year is expected to increase by 3.1%, and accelerating supply growth may affect copper prices; Furthermore, if the Bank of China adjusts credit in the second half of the year to curb financial risks, it could limit somewhat the upside potential of base metals in the final months of 2021. However, China’s strong investment in New infrastructure (electric vehicle charging piles, metro and 5G networks) has created a demand for green metals. The electrification revolution will benefit in many ways, and copper will be one of them.
In terms of gold and silver, Jiasheng Group believes that in the first half of 2021, gold will benefit from market uncertainty and the prospect of more fiscal stimulus plans. This also applies to silver (only 25% of silver supply comes from major silver mines) And in a bull market, silver generally performs better than gold, while in a bear market, silver it performs weaker than its opponent, gold, highlighting the relatively more unstable characteristics of silver. But in the second half of the year, if geopolitical risks are alleviated and the epidemic is under control, this will affect the momentum of gold prices.
Recently, there has been no shortage of large institutions that had previously been bullish on gold. For example, Wang Xinjie, chief investment strategist at Standard Chartered China Wealth Management, told a China Business News reporter that the reason for the change of mind was that even a weak dollar still supports gold, but this has been reflected in the price. With the popularity of vaccination, the hedging properties of gold are weakening. Also, if you want to talk about anti-inflation properties, this general gold characteristic will not be reflected until inflation reaches 4% ~ 5%. Therefore, gold is less likely to rise again in 2021, and more likely to be a trading range.
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