Joe Biden will be inaugurated as the 46th U.S. president Wednesday, and markets are watching to see how both his plan to combat Covid and his $1.9 trillion stimulus package will fare.
Biden starts off his presidency with a roughly 13% post-Election Day market gain, the best S&P 500 performance between the election and the inauguration for any president going back at least to 1952, according to CFRA.
If history holds, Biden’s stock market should continue to do well, since the average first-year gain for Democratic presidents is 11.3%, according to CFRA.
Earnings season gets busy in the week ahead, with reports from Bank of America, Goldman Sachs and Procter & Gamble.
President-elect Joe Biden moves into the White House in the coming week with the biggest stock market tailwind since a presidential Election Day going back to at least 1952.
According to CFRA data that begins that year, the near 13% gain since Nov. 3 would be the biggest increase in the S&P 500 between the election and inauguration if the gains hold. President John F. Kennedy’s 8.8% gain had been the best, followed by President Dwight Eisenhower, with 6.3%, and President Donald Trump, with 6.2%.
Biden’s promise of the $1.9 trillion relief package he announced Thursday is one of the reasons for the stock market’s surge, and it will be a big focus of markets in the week ahead as investors handicap its chances of winning congressional approval.
The Martin Luther King Jr. Day holiday starts off the week, and over the next four days several dozen S&P 500 companies report earnings. Bank of America, Goldman Sachs, IBM, Intel and Procter & Gamble are among the companies reporting.
Stimulus and stocks
Markets are also watching carefully to see whether Biden can bridge some of the deep divide between Republicans and Democrats, who now hold a thin majority in Congress.
“We’re getting stimulus, and now the question is ‘OK, you’re supposed to be this great compromiser,’” said Sam Stovall, chief investment strategist at CFRA.
Political strategists expect Biden will get his stimulus package but it will be trimmed down. Ed Mills, Washington policy analyst at Raymond James, said the package could be cut to about $1 trillion based on the size previously discussed by House Speaker Nancy Pelosi and outgoing Treasury Secretary Steven Mnuchin.
Stovall said that if history is a guide, the stock market should do well with Biden. The average gain of the S&P 500 in the first 100 days for Democratic presidents is 3.5%, going back to 1952. For Republicans in the same period, it’s been an average 0.5%.
The S&P 500 has also gained an average 11.3% in the first year of a Democratic president, but just 5.7% for Republicans, going back to World War II.
The stock market will continue to monitor the bond market, after the 10-year Treasury yield reached a high of 1.18% this past week, the highest since March. It since slid back to about 1.08% Friday after the weak data.
“Other things are going on in the back room. Bond yields have moved up of late, and it was a change. It gave you a sense of how fast rates can move,” said James Paulsen, chief investment strategist at Leuthold Group. “It might be a preview of what you can expect this year.”
Week ahead calendar
Monday
Martin Luther King Jr. Day
Markets closed
Tuesday
Earnings: Bank of America, Goldman Sachs, Netflix, Charles Schwab, Comerica, Halliburton, State Street, Interactive Brokers, J.B. Hunt, Zions Bancorp, FNB
8:30 a.m. Business leaders survey
4:00 p.m. TIC data
Wednesday
Inauguration Day
Earnings: Procter & Gamble, U.S. Bancorp, Citizens Financial, Bank of NY Mellon, Fastenal, United Airlines, Alcoa, Discover Financial
10:00 a.m. NAHB survey
Thursday
Earnings: Intel, IBM, Travelers, Baker Hughes, CSX, PPG Industries, Intuitive Surgical, Northern Trust, Union Pacific, Truist Financial, Fifth Third, KeyCorp
8:30 a.m. Initial claims
8:30 a.m. Housing starts
8:30 a.m. Philadelphia Fed manufacturing
Friday
Earnings: Regions Financial, Schlumberger, Ally Financial, Huntington Bancshares, Kansas City Southern
9:45 a.m. Manufacturing PMI
9:45 a.m. Services PMI
10:00 a.m. Existing home sales
Reference: CNBC
Thai
Eng