| | | | | | | Presented By Goldman Sachs | | | | Axios Markets | | By Dion Rabouin ·Dec 17, 2020 | | Good morning! Was this email forwarded to you? Sign up here. (Today's Smart Brevity count: 1,130 words, 4 minutes.) Join Axios' Stef Kight tomorrow at 12:30pm ET for a virtual event on immigration policy in the new administration, featuring League of United Latin American Citizens CEO Sindy Benavides and former U.S. Secretary of Homeland Security Michael Chertoff. Register here. 🎙"An ignorant people is the blind instrument of its own destruction." | | | | | | 1 big thing: Have no fear, the Fed is (still) here! |  | | | Illustration: Eniola Odetunde/Axios | | | | Fed chair Jerome Powell sought to reassure financial markets at the Fed's latest policy meeting that even though the economy is improving faster than expected, the housing sector has "fully recovered" and equity markets are hitting all-time highs the Fed isn't even thinking about, thinking about, thinking about, thinking about raising U.S. interest rates. Why it matters: The bonanza in the stock and housing markets have been buoyed by expectations for the continuation of rock-bottom rates and an avalanche of Fed bond buying. - Powell and other central bankers have been warning that the economy faces grave risks from the coronavirus pandemic in the near and medium term.
- And his words also assured traders, investors and speculators that the party in asset markets can continue.
Details: The lone major change to the Fed's policy statement this month was a promise to continue to buy at least $120 billion of bonds each month "until substantial further progress has been made toward the Committee's maximum employment and price stability goals." - That's great news for stock traders because it means the central bank will continue to push investors out of less risky assets like government bonds and money will keep flowing into riskier investments like equities.
On the other hand: The Fed increased its economic expectations for the economy, raising its real GDP forecast to a contraction of 2.4% in 2020, compared to a decline of 3.7% predicted in September. - The Fed also raised its 2021 GDP forecast to 4.2% from 4%.
- And the central bank now estimates the unemployment rate will fall to 6.7% this year, an improvement from its projection of 7.6% in September.
Driving the news: Stock prices initially edged lower after the release of the statement, but turned higher during Powell's press conference as he doubled and tripled down on the Fed's commitment to keep monetary policy "highly accommodative" for "quite some time." What's next: "There will come a time when the economy does not require increasing amounts of policy accommodation, and when that time comes, and that will be uncertain, and in any case, is some ways off," Powell said during his press conference (Your humble newsletter writer was not called upon to ask a question). - "So I can't give you an exact set of numbers. We, of course, as we approach that point, will be evaluating that."
|     | | | | | | Bonus chart: All good |  Data: FactSet; Chart: Axios Visuals Powell even weighed in on the debate over whether stock prices had reached unreasonable levels, as many on Wall Street have warned in recent weeks. No cap: Powell argued that while historic market metrics like companies' price-to-earnings ratios were high, "that's maybe not as relevant in a world where we think the 10-year Treasury is going to be lower than it's been historically from a return perspective." - "We're thinking that this could be another long expansion," he said later in his press conference.
- "What we're saying is we're going to keep policy highly accommodated until the expansion is well down the tracks."
| | | | | | | | 2. Catch up quick | | Cannabis giants Tilray and Aphria agreed to a merger that will form the world's largest pot company by sales and will trade under Tilray's name. (Bloomberg) U.S. retail sales declined 1.1% in November from the prior month, the second straight monthly decline. (WSJ) HBO Max will be live on Roku effective today, WarnerMedia and Roku announced, giving the streaming service coverage on all major over-the-top platforms. (Variety) JPMorgan lost out to Morgan Stanley in a $7 billion bidding war for U.S. investment management firm Eaton Vance in the latest battle of Wall Street powerhouses looking to beef up their asset management arms. (FT) | | | | | | | | A message from Goldman Sachs | | Why is resilience key to investing? | | |  | | | | Permira's Tom Lister joins Goldman Sachs' Insights from Great Investors to discuss the 3 sectors he is focused on in the investing landscape: - Health care.
- Technology.
- Consumer marketplaces.
Learn why he thinks resilience is a key trait of great investors. | | | | | | 3. "Bitcoin should be worth about $400,000" |  Data: Yahoo Finance; Chart: Axios Visuals Guggenheim Partners CIO Scott Minerd asserted on Bloomberg Wednesday that bitcoin's current price is well below fair value and that given its scarcity and the "rampant money printing" by the Fed, the digital token should eventually climb to about $400,000 per coin. By the numbers: Bitcoin rose above $23,000 overnight (our data viz team made this chart at 3:40pm yesterday) bringing its 2020 gain to more than 200%. - Last month, Guggenheim filed to reserve the right to invest as much as 10% of its $5.3 billion Macro Opportunities Fund in the Grayscale Bitcoin Trust, which invests solely in the cryptocurrency.
What he's saying: "Our fundamental work shows that bitcoin should be worth about $400,000," Minerd said. "It's based on the scarcity and relative valuation such as things like gold as a percentage of GDP. So you know, bitcoin actually has a lot of the attributes of gold and at the same time has an unusual value in terms of transactions." - Similarly, hedge fund manager Paul Tudor Jones said earlier this year he's been buying bitcoin as a hedge against inflation after years of muted price increases.
Bulls on parade: "We have a new line in the sand and the focus shifts to the next round number of $30,000," Antoni Trenchev, co-founder and managing partner of Nexo, a crypto lender, told Bloomberg. - This "is the start of a new chapter for bitcoin. It's a narrative the media and retail crowd can properly latch onto because they've been noticeably absent from this rally."
Don't sleep: Market metrics that track inflation have continued to rise in recent weeks. The 5-year breakeven rate was 1.92% Wednesday, its highest closing point since March 2019, Tradeweb data show. - The 10-year breakeven rate is 1.94% and at its highest since May 2019.
- The 30-year breakeven rate is 1.98%.
| | | | | | | | 4. Progressives fear false stimulus hope |  | | | Illustration: Eniola Odetunde/Axios | | | | Axios' Jonathan Swan writes: A leading progressive is sounding the alarm about an "austerity mindset" inside the Democratic Party, suggesting the biggest stimulus package President-elect Joe Biden gets may come during this lame-duck session of Congress. Why it matters: Faiz Shakir, a senior adviser to Bernie Sanders and the senator's 2020 campaign manager, says Democrats may be embracing a misguided assumption that Biden will get another bite at the stimulus apple next year. Recent history, he argues, shows that won't be the case — which is partly why Sanders has been pushing for the biggest package possible during current negotiations. "Before Biden even enters office, Democrats are limiting the ambitions of what we can pass in a COVID relief package, saying it can't have a 't' in front of it, it shouldn't be above $1 trillion, with the assumptions that somehow we're going to have future runs of COVID relief packages to fill in the gaps," Shakir tells Axios. - He points to recent talk from moderate Democrats like Sen. Joe Manchin, after the West Virginian talked about what could be regained in a hypothetical second round of stimulus talks next year.
- Shakir, as well as several other top progressives who spoke privately to Axios, said, "We should not assume that."
The case: Shakir points to the economic recovery package that a newly minted President Obama accepted in 2009 while trying to pull the country out of the Great Recession. Progressives like Sanders urged him to think even bigger than the $831 billion bill Obama eventually accepted. - The bill passed without a single Republican vote and helped launch the Tea Party movement.
- Now, Senate Majority Leader Mitch McConnell has stared down House Speaker Nancy Pelosi and her fellow Democrats, even as millions of Americans have lost jobs, coronavirus cases and deaths have exploded and relief checks have shrunk from $1,200 to $900 to $600, potentially.
| | | | | | | | A message from Goldman Sachs | | What's on the minds of some of the world's great investors? | | |  | | | | Each week, Goldman Sachs brings viewers an interview with leading private and public investors. Why it's important: Some of the world's greatest investors will provide insight on their investing philosophies and how they are approaching the new investing landscape. Explore their insights. | | | | Thanks for reading! Quote: "An ignorant people is the blind instrument of its own destruction." Why it matters: On Dec. 17, 1830, military leader and political revolutionary Simón Bolívar died. - Bolívar was a Venezuelan soldier and statesman who led what are currently the countries of Venezuela, Bolivia, Colombia, Ecuador, Peru and Panama to independence from the Spanish Empire.
| | | | Axios thanks our partners for supporting our newsletters.
Sponsorship has no influence on editorial content. Axios, 3100 Clarendon Blvd, Suite 1300, Arlington VA 22201 | | | You received this email because you signed up for newsletters from Axios.
Change your preferences or unsubscribe here. | | | Was this email forwarded to you?
Sign up now to get Axios in your inbox. | | | | Follow Axios on social media:    | | | | | |
No comments:
Post a Comment