Key Points
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Gold prices hit a new record close of $2,021 per ounce overnight — settling above $2,000 for the first time. [1]
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China, U.S. to review trade deal, air other grievances on August 15 [4]
Spot gold prices have spiked more than 32% so far this year and are on track for the best year since 1979.
Stocks rose across the board on Tuesday, building on the previous session’s strong gains, as lawmakers tried to make inroads on a new coronavirus stimulus package.
Both sides have indicated they agree on another $1,200 stimulus check, but remain deadlocked on additional unemployment assistance.
“In our opinion, Congress will muster the fortitude to deliver near-term stimulus support,” said Darrell Cronk, president of Wells Fargo Investment Management, in a note. “However, a greater challenge comes in 2021 when this year’s extraordinary fiscal stimulus programs fade.”
“What valuation is warranted by a sector whose business grows faster for reasons that are less dependent on overall economic conditions, and whose members generate remarkable excess returns with superior frequency, compared to any other sector in the stock market?” [2]
Mueller-Glissmann highlighted that the key driver of markets in recent months had not been optimism on growth, but rather optimism on inflation, and said there was a “tactical opportunity” for investors in cyclical sectors. [3]
Equity markets could be stuck in a “fat and flat” range characterized by weaker returns and greater volatility, according to Christian Mueller-Glissmann, head of asset allocation at Goldman Sachs. [3]
“Investors are still comfortable that the trajectory of earnings is on the right path and the 2021 outlook has remained intact. All that helps support the market at these levels,” said Lindsey Bell, chief investment strategist at Ally Invest.
“But there is an underlying level of uncertainty leading to a bit of caution,” Bell added.
Investors are awaiting a major new coronavirus-aid bill, with Senate Democratic Leader Chuck Schumer saying talks with the White House were moving in the “right direction.” [4]
White House negotiators late Tuesday vowed to work “around the clock” to reach a spending deal by the end of the week, but the Treasury Secretary warned they were not “going anywhere close” to the $3.4 trillion Democratic leaders sought. [4]
The stimulus expectations on Tuesday sent gold prices above the key $2,000 mark for the first time in history and lifted crude oil futures LCOc1 to their highest since March.
Bullion also got a boost as treasury bond yields fell to new lows, National Australia Bank analysts said on Wednesday. The five-year treasury yield hit a record low and the benchmark 10-year Treasury yield dropped to a five-month trough, indicating dim investor outlook for the U.S. economic recovery. [4]