A return to normalcy is the most common refrain from the US since the Biden election and for stock markets that means trade based on COVID and the US Fed.
No more late night policy by Twitter.
It is fitting Joe Biden’s first policy announcement, due Monday night our time, is naming an eminent group to lead the attack on COVID which is wreaking havoc through the US.
Without controlling the virus other policies take second fiddle.
The US Fed like the RBA has essentially said interest rates will stay low for the next three to four years at least while both will stay active in so called unconventional monetary policy.
For investors the prevailing theme then is low growth in a low interest rate environment.
US stocks are expensive trading at 21.8 times forecast earnings against a five year average of 17.6 times.
Stocks like Apple are trading at 29 times forecast earnings against an average 16.1 times which shows how growth stocks are taking on extraordinary leaps of faith in the present environment.
Last week US stocks rose 7.3 per cent while bond prices allied strongly pushing yields down .
The latter was due to unwinding the Biden stimulus trade with expectations that the new US President will have a divided Congress which makes it harder to get his package through Congress.
As Australia fights an increasingly threatening China the good news from the Biden victory is he is a firm believer in multilateral organisations.
For a small country like Australia a rules based trading system is vital and while China is rampant we can expect the US to play a more conventional game working with global partners.
President elect Biden will of course stick to the America first policy but in a more collaborative way.
President Trump instituted landmark cases against Google and the war on big tech can be expected to continue with many states already instituting their own actions .
Trump will not go quietly so volatility will continue but Biden is now the main game.
To corrupt, Clinton adviser James Carville’s famous saying, it is the economy but it‘s the virus first stupid.
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