Investors Spurred By Once-In-A-Generation Spending Splurge

Market highlights 

  • Investors spurred on by once-in-a-generation spending splurge to the tune of USD 2 trillion
  • Oil is in the midst of a very rough patch
  • Gold a significant beneficiary of month-end rebalancing
  • Month-end distortions make it difficult to get an accurate read on the FX markets


President Biden began selling his infrastructure proposals today, and by all accounts, it went over exceedingly well. Investors first applauded then gobbled the array of equity market delectables on offer, spurred on by the once-in-a-generation spending splurge that continues to the tune of a $2 trillion ticket price. Bullishly, that would convert into 20,000 miles of rebuilt roads and a glossy catalogue of other ventures intended to create millions of jobs in the short run while strengthening America’s competitive domestic and foreign ambitions in the long run.

Whatever suggestion there was about "everything being in the price" should be put to bed as, by the looks of the price action, there’s still a long catalyst runway on the reopening and vaccine narrative. And that’s not to mention the arrival of those stimulus checks that should feed directly into corporate profits, which isn’t necessarily reflected in earnings yet.

Markets remain incredibly resilient, despite worries around rebalances. Rotation into value continues to take hold; Europe outperforming, banks exceeding tech, and momentum strategies seeing value enter the composite, and providing an extremely powerful passive tailwind.

Vaccine rollouts drive the narrative even with the EU lagging, with investors' view that this is a function of time. 

The bullish cocktail of fiscal stimulus and pent-up (consumer) spending will propel economic growth powerfully, and the US consumer confidence data provided an excellent reminder of this.

I think pockets of froth exist in some reopening names (namely airlines) but it’s difficult to fight this momentum en masse. Therefore, relative trades remain the most prudent (long, strong balance sheets). As things stand in Europe, the prospect of a meaningful summer travel recovery looks questionable. 

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