Pro Perspectives 2/6/20

February 6, 2020

On Monday, we talked about two markets to watch that would likely dictate the sentiment in global markets in the coming days: Chinese stocks and the Chinese currency (the yuan).

Both opened the week with a big gap down. But both have since been recovering nicely, driven by the policy response of the Chinese central bank, by the direction of the Chinese government.

Here's a look at Chinese stocks, up 7% from the Tuesday lows …

Indeed, this has translated into higher global markets, and less fear about a draconian outcome from the coronavirus.

With that, low rates, expanding global central bank balance sheets and a fundamentally solid economy, U.S. stocks are back on record highs.

Supportive of that, we continue to get positive surprises in fourth quarter earnings. Global manufacturing data (the concern of last year) is bouncing back, following the U.S./China trade deal. And we're going to get another big jobs number tomorrow.

With the impeachment circus now over, and the pandemic threat softening, will Trump turn toward the next pillar of Trumponomics: infrastructure.

It seems unlikely. In Tuesday's State of the Union address, he only made one mention of it. And he was urging Congress to pass a transportation bill that's been on the table since mid-19. This is a fraction of the spend of the $1-$2 trillion deal he was negotiating with Congress two years ago. Perhaps he's looking to give less and get more of what he wants out of an infrastructure spend. That would mean infrastructure will be addressed after the election.