After a brief slump overnight, stocks are surging, lead by reflation-friendly small caps which have hit another record, although with the Dow Jones now also at all time highs even the duration-sensitive Nasdaq is in the green.
While there is no catalyst to explain the reversal, one argument making the trading desk rounds is the realization that much more stimulus is coming, and very soon, as the following Bloomberg headline reveals:
- DEMOCRATIC SEN. WYDEN EXPECTS EARLY VOTE ON MORE COVID RELIEF
How big are we talking? Well, with goalseeked narrative estimates coming in fast and furious – after all sellsiders need to reflexively justify their bullish outlook now that stocks are surging – the first ones we have seen this morning come from Goldman and Bank of America. Here is what the former expects, as highlighted earlier:
- A Democratic Senate majority to allow for greater fiscal policy changes. This would include additional fiscal stimulus in the near term — Goldman has penciled in $600bn (2.7% of GDP) in additional stimulus under this scenario. Read More