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Announcement of Biden’s new infrastructure package

Announcement of Biden’s new infrastructure package

Headline this week:

With markets closed last Friday for the long Easter weekend, the S&P 500 closed above 4000 for the first time ever following Biden's new infrastructure package announcement and positive Manufacturing PMI & Employment data on Thursday. The gains were broad-based with Tech, Financials and Energy all substantially in the green. The new claims for unemployment did come in higher than expected, but the 4 week average of the continuing claims (more indicative of the trend) was at its lowest since March 2020.

Market updates:

The VIX (volatility index) also dropped to 1Y lows around the 17 level now. Equities globally were bid last week and we expect the gains to hold this week with the NFP (Non Farm Payroll) release on Friday showing the US added nearly a million jobs in March (well above expectations).The US yield curve got flattered over the week though (which is contrary to the optimism narrative) but could just be a pullback from the rapid steepening we have seen this year. The 2Y yield traded up to 0.18% and the 10Y yield fell back to about 1.7% levels.Gold and Bitcoin were largely stable and Oil did seem better bid on the week as well.The US dollar continues to remain strong, which is usually a negative for EM markets (their USD debt is harder to repay) but they have remained unfazed in the broad rally so far. The concerns around the third wave of infections in Europe did intensify over the weekend and India has seen its daily cases rise from 15k to 90k in under a month, with parts of the country announcing lockdowns once again.On the positive side, the vaccination drive has been progressing on schedule in most parts of the world and geopolitical tensions between China and the rest of the world seemed to have calmed down since last week. We have rate decisions this week from the central banks in Australia and India (both expected to hold) and the positive sentiment will likely stay intact as more details on the US infrastructure package emerge.

By

Kristal Advisors

April 6, 2021

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