Lessons Learned… “Expect the unexpected”… Surely if 2020 taught us anything, that would be one of the primary takeaways. With that in mind, it’s not a shock to see investors treating the Senate run-off election in Georgia with caution despite the increasingly shaky consensus there won’t be a Democratic sweep. Yet US indices are attempting to make up some of the ground lost in yesterday’s bumpy ride (granted on near holiday-like volumes), thanks largely to Energy leading the way on back of WTI crude briefly rallying past $50 for the first time since February as OPEC+ reaches a deal on voluntary output cuts through March (XOP +9%). The positive start to year in terms of eco-data continues, as a solid beat from Dec ISM Manufacturing helped solidify the positive tone this morning. The gains also come as Value is outpacing Momentum names (VLUE +1.3% vs MTUM +0.6%), as a Democrat triumph would mean more stimulus spending (DXY lower again) and as the profit-taking action seen yesterday sees some follow through. The love for Cyclicals consequently has more defensive sectors on the back foot: Food Retail, Household Goods, and Telcos are all in the red.
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