Brexit, US Stimulus and Fed meetings the key focus for investors

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Brexit and US Stimulus deadlines pass without meaningful change

The Collins Dictionary defines a deadline as ‘a time or date before which a particular task must be finished or a particular thing must be done.’ With US Fiscal Stimulus and Brexit talks both hurtling through yet another pair of ‘deadlines’ at the end of last week, one can’t help feeling the 2021 edition needs some updating.

Yesterday UK Prime Minister Johnson and European Commission President von der Leyen held a call followed by a joint statement confirming that the negotiating teams would continue to talk over the coming weeks. There were no new deadlines set but frankly with two and a half weeks to go until the end of the transition period, there really isn’t a need for manufactured urgency. The tone at a leader level is very much that both sides remain far apart but even if a deal is close this will be the language until the last moment. After a torrid week for sterling and UK domestic equities, we are seeing both bounce today but remaining below levels seen a few weeks ago when more hope was baked into UK sensitive valuations.

Congress is set to debate split stimulus bills as lawmakers attempt to break the deadlock

The big question this week will be whether the US can get a fiscal package over the line ahead of Christmas. In an attempt to break the deadlock, there are two bills going to Congress today – a $748bn package which contains the less contentious areas and a separate c. $160bn bill with the thorny topics such as state and local aid1. House Speaker Pelosi and Treasury Secretary Mnuchin are set to talk yet again to try to reach a compromise position.

This week sees the last Federal Reserve and Bank of England policy meetings of 2020

This week we see the final meetings of the Federal Reserve and Bank of England rate setting committees. The markets are not expecting any meaningful change in the US but for the language around quantitative easing to be ‘enhanced’ as the bank releases its latest Summary of Economic Projections. In the UK a similar meeting is expected, especially after the additional Quantitative Easing announced in the November meeting.

Despite Christmas being just around the corner, there are some major macroeconomic events for investors to navigate through this week. Optimism has grown today around both US stimulus and Brexit, although this is from the low base set last Friday. The second half of December is traditionally a lower volume period for equities however, with COVID-19 restrictions changing working norms and the macro diary packed, the wind down will likely be delayed a further week.

View  Article – published by Brooks Macdonald on 14th December 2020

1 Bloomberg, 13 December 2020 (https://www.bloomberg.com/news/articles/2020-12-13/full-908-billion-pandemic-bill-coming-monday-democrat-says)