Swissquote: Thanksgiving, Black Friday, inflation and more!

November 22, 2021

By Ipek Ozkardeskaya, Senior Analyst, Swissquote 

The week kicks off on a mixed note in Asia, but the US futures are in the green at the start of what will be a short trading week in the US.

Based on the historical data, the Thanksgiving week is a strong week for the US equities; there is a two-thirds chance that we will see the US stocks up on the day before and after Thanksgiving.  

Of course, the Black Friday sales will be closely watched this week and the expectations are quite strong. The National Retail Federation predicts that the holiday sales between November and December should increase between 8.5 and 10.5% this year, to somewhere around $850 billion. But again, a part of this increase is due to inflation, to the fact that the items that people buy are simply more expensive than they were a year ago, because inflation in the US is at a three-decade high! But the good news is, people still have money to spend, even though they get less goods and services in exchange of what’s spent.  

The S&P500 is headed to the Thanksgiving week a touch below its all-time high, and Nasdaq is already at record levels, regardless of the rising expectations for a tighter Federal Reserve (Fed). At this point, it is also possible that investors start factoring in the fact that the rising Covid cases will keep us home another winter, a situation which could give an additional boost to the metaverse dream. In this sense, Meta closed near 2% up on Friday, and the stock price is already up by around 15% since the October dip.  

Joe Biden’s other $2 trillion worth of spending proposal just passed the House on Friday. It is now headed to the Senate and will probably sit there for a while, as the US politicians will first need to find a solution to their debt ceiling problem, before adding another $2 trillion debt on top of it. Looking at the soaring inflation, the US can’t continue spending at an accelerated speed and keep the monetary policy this loose. Otherwise, the economy will soon catch a flame!  

The US short term yields continue pushing higher, and the upside potential is high.  

And on the Fed front, we are still waiting for Joe Biden to decide on who will be the next Fed Chair. But again, bringing the most dovish of the doves wouldn’t guarantee a longer period of zero rates in the US. If the decisions are based on economic fundamentals, the economy is calling for a rate hike. And it’s calling for it quite soon. 

And not only in the US. The Reserve Bank of New Zealand is expected to hike rates for the second time this week to 0.75% and the market is pricing in a 100% rate hike from the Bank of England (BoE) in December.  

In commodities, US crude remains under a decent selling pressure on prospects of a combined decision from the world’s most oil-hungry countries to tap into their strategic oil reserves to cool down the rally in energy prices. The rising Covid cases, and the announcement of new lockdown measures are now weighing on the prospects of demand, as well, and strengthens the case for a further selloff in the short run, to meet the 100-day moving average near $74 per barrel. There is also a potential for a deeper selloff to the $70 per barrel mark, but I believe the downside potential should be limited at these levels, because we are still in the middle of a global energy crisis and the need for more energy in the winter months doesn’t help. 

The weaker oil is pressuring the FTSE to the downside, but the weaker pound should temper a part of that negative pressure on the British blue-chip index. At the end of the day, the FTSE is well positioned to benefit from higher interest rates, as the index is heavy in bank stocks.