US 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 generational spending splurge that continues to the tune of a massive $2 trillion ticket price.

And 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 is still a long catalyst runway on the reopening and vaccine narrative.

Not to mention the arrival of those stimulus checks should feed directly into corporate profits, which is not 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 provides an extremely powerful passive tailwind.

Vaccine rollouts remain the name of the game and drive the narrative even with the European Union 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 is difficult to fight this momentum en masse. Therefore, relative trades remain the most prudent (long, strong balance sheets). The prospect of a meaningful summer travel recovery, as things stand in Europe, looks questionable.

Real yields rallying has boosted the cyclical and reflationary thematic aggressively this week – led by banks – but commodities have difficulty shrugging off the US dollar’s strength for now.

Markets will continue to pay close attention to the US dollar development while maintaining the view that the pace of the yield moves’ trajectory is a potential headwind for equities rather than absolute levels.

Let’s not forget the US rates debate remains at the forefront of all conversations and could eventually be the ultimate rally capper.

The fact that stocks remained at record highs even with the US yields holding higher ground suggests, at some level, the US Fed’s messaging is hearing an echo in the market with investors buying into their average inflation targeting mantra, which anchors short end rates but allows bond yields to rise.

In other words, less gas but more brakes on the policy normalization front.

Finally, and not to put a wet blanket on things, passing a bipartisan bill is likely to be difficult as Republicans are saying higher taxes would be a non-starter, and the same goes for moderate Democrats Joe Manchin.

Rough still on a rough patch

We are in the midst of a very rough patch of oil as the short-lived bounce from the Suez Canal blockage has given way to another demand hit after France announced it was stepping back into the lockdown abyss.

And the fragile demand recovery is begging more question than answers around the new variants that are raising alarm bells around the globe.

While the market remains medium-term optimistic, it’s hard not to stay short-term defensive in the face of more lockdown, especially at this stage of the game where oil traders thought they would be mounting a solid offence not putting up a defensive front.

But the market is finding some legs on first blush to the glossy US infrastructure plans, so perhaps this could be the springboard or at least plank for prices to build a base, hopefully.

Still, traders need to position for OPEC what-ifs who in the past have been overly charitable at the cost of missing the opportunity to reintroduce some latent supply while it can before that becomes much more difficult in 2022 when shale producers could be in better financial positions.

But at the heart of it all, the rally was mainly on the back of OPEC+ production cuts—or rather, the fact that they agreed to hold production steady in April instead of ramping up production as the market had anticipated.

So I suspect the oil market is experiencing a bit of reality check these days as the supercycle bulls might be giving way to the power of spare capacity as the thought of more barrels coming back continues to provide the medium-term supply headwind.


With UST 10 year yields still above 1.70 and the dollar sailing on an even keel, gold seems to have been a significant beneficiary of month-end rebalancing.

It is worth highlighting going into quarter-end that gold has underperformed US 10-year bonds by 5% and US equities by around 15-20%, so if there was a need to rebalance portfolios, it is likely to be gold buying at current levels – and probably what is behind today’s move.

Euro struggles for direction

The EUR struggles for direction this morning amid mixed signals relating to the economic outlook but weighted down buy France moving back into lockdown. The only thing is that short EURUSD has come a long way, and as we approach a critical Non-Farm Payroll so rather than chasing the current trend, US interday bulls might prefer to change tack and sell rallies into 1.1800, so a short term correction could be on the cards.

Malaysian Ringgit on the defensive

With oil prices plummeting overnight, the Malaysian ringgit remains defensive. And with reopening sectors taking another hit after the government extended mobility restrictions in some areas, including KL after spot Covid-19 outbreaks, the near-term purview isn’t great at the moment.

Market analysis from Stephen Innes, Chief Global Market Strategist at Axi