Inauguration Day, Strong Netflix/Morgan Stanley earnings, COVID update, BOC holds

US stocks roared higher on strong tech earnings and as President Biden was sworn in and is widely expected to unleash several well-telegraphed executive orders.  Risk appetite remains in place as President Biden has clearly signaled; he will not have a completely progressive agenda.  A new era is beginning as investors pile back into equities, thanks to assurances from both Treasury Secretary nominee Yellen and Fed Chair Powell that the US economy needs more help.  Yellen’s call for “big” action and Powell’s consistent dovishness means the punchbowl of stimulus is only going to grow in President Biden’s first year.

Netflix cheers investors

The first big tech earnings report from Netflix impressed.  The streaming giant added 8.5 million subscribers, well above the analysts’ expectations of 6 million.  The pandemic helped drive their paid subscriber count to over 200 million, doubling what they achieved in 2017.  Netflix missed on EPS, revenue came in line with analysts’ forecasts, but shares focused on the news they are considering stock buybacks.

Morgan Stanley wrapped up the major banks’ earnings results and boy, did they deliver.  Morgan Stanley provided record revenue in 2020 and posted outstanding trading results across the board.  Everything looked great from equity and fixed-income trading, investment banking, and wealth management.

Covid and fiscal stimulus

It seems vaccine delays, new infections, re-infection concerns, and extended lockdowns, are only raising the prospects for more global monetary and fiscal stimulus.  Across Europe and the US, vaccine delays are raising concerns many individuals won’t get their second dose as initially anticipated and that could lead to many not developing full immunity.  Delaying second doses is a risky gamble that could end up wasting many doses.  The new virus variants are scaring health experts and it will take a lot of time to see how the current vaccines will hold up.  Pfizer’s COVID vaccine had a lab trial that showed it was able to protect against the UK strain, while South Africa’s CDC reported that a study showed that the South African virus mutation (K417N & E484K) was resistant to antibody neutralization and that half the people were no-longer protected from reinfection.  The reopening of the global economy has been delayed due to virus mutation (Beijing announced lockdowns for about 1.7 million residents in Daxing district) and as some countries (UK, Germany and Mexico) continue to see record COVID death figures.  We are slowly leaving the peak of the virus but extending lockdowns continues to trump calls for reopening.

Right now, it seems that Wall Street only is focused on J&J’s COVID vaccine which could come out any day.  My guess is that they will follow the Monday theme from Moderna and Pfizer and announce on January 25^th in the pre-market.  For Biden to have a chance to reach his 100 million doses in 100 days, he needs the J&J coronavirus single-dose vaccine to be at least 80% effective against COVID-19.

Mr. Biden goes to Washington

Today’s Inauguration Day was like no other.  With 25,000 National Guard fortifying Washington DC, the inaugural ceremonies symbolized where the country stands on so many levels: A divided America during a pandemic.  The inauguration of Kamala Harris was a historic moment for the country.  Harris is the first female, first Black and first South Asian to become vice president.

Joseph R. Biden became the 46^th president and is widely expected to deliver at least 15 executive orders that will undo some of the last four years of President Trump.  President Biden’s speech attempted to unite the country, signaling he will repair global alliances, focus on jobs, and do whatever it takes to fight COVID.

On Day One, President Biden will rejoin the Paris Climate Accord, commit the US to staying in WHO, end border wall construction, halt the Muslim travel ban, and revoke the Keystone XL pipeline permit.

Yellen lays out stimulus plan

Treasury Secretary nominee Yellen did an amazing job yesterday in laying out an argument for massive stimulus.  It seems Wall Street now has both a Fed and Treasury put. She provided Republicans some satisfaction in noting she will take on China’s abusive and unfair practices, adding she will take on a review of sanctions policy.

Regarding the US long-term fiscal trajectory, Yellen made no doubt that more support should happen and that while the debt-to-GDP ratio is higher, interest as a share of GDP is not above the financial crisis levels.

The Canadian dollar rallied after the Bank of Canada kept its overnight rate steady at 0.25%, as expected but disappointing some who were eyeing a micro-cut.  The BOC seemed downbeat, revising down growth forecasts, emphasizing the importance of vaccine execution, and highlighting options if the economy deteriorates.  Governor Macklem noted that a micro-cut is one option available for the central bank.  He added that if inflation picks up, they could back off of QE.  Earlier, the December CPI reading showed price pressures dropped in Canada.  The Canadian dollar rallied to the strongest levels since April 2018.

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