Equities back in the familiar territory of record highs
Headline this week:
One week removed from the Fed's hawkish tilt and the S&P 500 closed around 4280 levels last week. The big event was the Wall Street banks comfortably clearing the latest round of the Fed's stress tests. This will now enable the distribution of the record gains they have seen since the onset of the pandemic back to shareholders. The payout (via dividends and share buybacks) is estimated at around USD 140 billion for the top six banks. The utility sector closed out the week strong as well with most other sectors finishing in the green too.
Another cause for optimism is a bipartisan infrastructure bill that was agreed upon in the US, though the scale (just below 600 billion) is lesser than the Democrats are pushing for. The US dollar slid somewhat from its strong run up the prior week - the Australian dollar and NZ dollar were the prime beneficiaries with gains of about 1.5% each. The Mexican Peso also gained 4% on the week after the central bank unexpectedly raised rates citing reducing unemployment and rising inflation. The US yield curve was stable and got a little flatter. Crude continued to push higher and Gold and Bitcoin were mostly rangebound.
Crypto has had a tough week after China's crackdown kicked up a notch. Despite that, the 31k support in Bitcoin held over the weekend and we're seeing some strength come through in the Asian session this morning. This is still around a 50% decline from all-time highs seen prior to the Coinbase IPO in Feb. And speaking of IPOs, a record USD 320 billion was raised in the first six months of 2021, eclipsing the 280+ billion raised in H2 2020 - pointing to either excesses or strength in the market, depending on one's point of view.Ahead this week, we have the PMI sentiment indicators globally and US Non-Farm Payrolls (NFP) on Friday. Another space worth keeping an eye on would be China - the US-listed ADRs closed out the last week on a high with names like Alibaba, Baidu and Tencent leading gains. This could be indicative of a shift in sentiment as the regulatory headwinds get priced in.
June 28, 2021
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