Today, the dominating idea is that President-elect Joe Biden will announce this week a new stimulus package, which will join the one that had been approved at the end of 2020. This new oxygen injection in the North American economy and mainly in households, where a good part of the capital to be distributed is directed, will certainly be a positive reason for the market, however the size of the stimuli can generate an undesirable effect and which investors have incorporated in their strategies since the beginning of the year, namely the possibility that with so much money injected into the economy will behave more than expected, to which will be added the control of the pandemic in the middle of this year, and this will cause a change in the mindset of the EDF from ultra-dovish, to neutral, which what happens is unlikely to result in a significant correction in a market addicted to low interest rates and excessive liquidity.
As soon as it was known that the Democrats won the two contested seats for the US Congress, and thus secured the majority in all decision-making centres of the legislation, the feeling was that the proposal presented by the party of the next president, in the negotiations from last year, it would end up being approved in its entirety, being able to be at once or phased, a stimulus package in the order of $3 trillion. This is clear without restricting the open door to more money, if it is justified after the critical winter period when pandemics have proved to be more deadly, not least because with the Democrats in power, more spending is expected from the Government, in addition to the extraordinary, which on the one hand can undoubtedly be a bonus for the economy, but which can cost the Bull Market to Wall Street, leaving the elephant in the middle of the room for now, I mean the mountain of public debt created and to be created due to the pandemic, which will add to the debt that already came from the 2008 financial crisis, and which has never been reduced, on the contrary, it has been growing in the main economies of the world.
