2021 Policy Outlook Updates | Daily Market Update

Monday, January 11, 2021

Top Story

Stocks open modestly lower as investors reassess risk sentiment.

  • The US dollar traded higher with demand supported by higher Treasury
  • European stocks pulled back from a 10-month high in midday trading as Germany underperforms.
  • Asian markets were mixed overnight as China underperformed; Japan’s market was closed for a holiday.

Daily Insights

Updates to LPL Research’s 2021 policy outlook

A Democratic majority in the Senate may impact several areas of the market.

  • The overall impact for stocks is neutral to slightly negative as prospective tax increases could be as much as a 5% hit to corporate America’s bottom line, but added stimulus may support revenue growth.
  • Stimulus prospects increase our bias toward higher interest rates and a falling US dollar.
  • Energy policy may continue to support alternative energy, although some of that has been priced in already.
  • Expansion of the Affordable Care Act (ACA) may benefit the healthcare
  • Fiscal stimulus may also help support municipal finances while demand for municipals could increase with higher taxes, although valuations are no longer attractive.
  • Rotation toward the “reopening trade,” with some added buying pressure for cyclical equities, small caps, and emerging markets, may continue.

Technical update

Last week saw a surge in new highs at both the index and individual stock level that historically has signaled above-average returns over the intermediate term. In the near term, the US dollar is continuing its rally from last week and may present a short-term headwind to risk assets. Data released Friday shows speculators positioning remains the most net short US dollar futures contracts since 2011.

COVID-19 news

The United States reported 214,000 new daily cases Sunday, up marginally from Sunday of last week.

  • The trend in the 7-day average of new cases may be in the early stages of flattening after the post-holiday surge (source: Johns Hopkins).
  • New cases in the United Kingdom also may be peaking as week-over-week growth has moderated.
  • The pace of vaccination has increased modestly following greater scrutiny of the rollout process (source: COVID Tracking Project).

2020 in 20 Charts

2020 was a historic year in many ways, which made it hard to highlight just a few charts. So in honor of 2020, we picked 20 charts that show how amazing–and devastating—2020 really was. Chief Market Strategist Ryan Detrick reviews 2020 in 20 charts in this YouTube video.

10 Lessons LPL Research Learned in 2020  

LPL Research reviews its top 10 takeaways from 2020, including the 2020 year-end rally and what the markets are saying about the Georgia runoffs. Listen to this week’s Market Signals podcast, also available on the LPL Research YouTube channel.



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