Approval for Biden’s first 100 days. What is next?

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3. maj 2021 | 5 Læsetid

The first 100 days are considered a good measure for an incoming president of the United States. If the president does not get the machinery rolling during this period, then it is a clear sign that this is a trend that is likely to continue.

The first 100 days are considered a good measure for an incoming president of the United States. If the president does not get the machinery rolling during this period, then it is a clear sign that this is a trend that is likely to continue.

Perhaps it is the stark contrast to the screaming president Trump that creates a distorted picture. In our eyes, the first 100 days for Joe Biden seem to be almost a success. He has chosen, naturally enough, to focus on rolling out as much vaccine as possible. Contrary to the Swedish Government, Biden has chosen high goals that he has been able to achieve, which creates a positive momentum.

However, do not forget that Biden took office just when the United States began to accelerate vaccinations. It is therefore too early to declare a long-term success, even if both opinion polls and the stock market gives him good ratings. The financing of USD 1.8 trillion in aid to be distributed through increased corporate taxes will probably be his real challenge.


Looking at Gallup’s classical surveys, Joe Biden has a relatively high approval rate of 57 percent.


Above are historical comparisons with other US Presidents. It shows that Joe Biden is slightly better than average but far from other previous presidents such as Kennedy and Eisenhower. Even presidents with mediocre histories such as Jimmy Carter and Barack Obama had higher confidence figures. Note, however, that this is an average number and that the figures fluctuated over the periods.

Joe Biden has profiled himself with the word Bipartisanship, which means that his goal has been to bridge the deep gap between Republicans and Democrats. But even the pro-Government CNN notes that not a single Republican congressman voted for Joe Biden´s bill for Covid-19. Even within his own Democratic party, there is a strong opposition to the bills currently being drafted on immigration, rules for voting on new bills (filibuster) and the major package on infrastructure investments planned.


No matter who reviled President Trump was, his tax cuts meant a revitalization of the New York Stock Exchange and the business climate in the United States. He lowered the corporate tax rate from 35 percent to 21 percent. Joe Biden now wants to finance the large USD 1.8 trillion financial support by raising the corporate tax rate to 28 percent. Some advisors who see the opposition grow, want to stay at 25 percent.

From a stock market perspective, large flows are at stake. Higher or lower earnings per share affect cash flows, earnings per share and ultimately companies’ ability to repurchase existing shares.

Joe Biden will probably bite the grass here. He will have to bet on a compromise. What is a little worrying is that the super-soft finance minister Janet Yellen sees no problem at all in raising the national debt further? As a former Fed chief, her words weigh heavily.  The current Fed chief shows no signs of showing concern either. The Fed is fully prepared to parry new crises with the help of new financial support. The financing of the large subsidies is therefore presumably not paid for by the companies but rather borrowed by the US government.

No one knows when this bubble will burst, but it is still important to keep the ear against the rails. Valuation is likely to continue to rise, which makes the older generation who stuck to P/E ratios to sweat even more.

An interesting point of view in this debate comes from McClellan. He writes that he has watched the stock market from several angles since the early 1990s but never really wrote about valuation. Not because valuation is uninteresting but since they are worthless from a timing perspective. Read the article here

An interesting graph is the following:


It focuses on a measure created by Schiller where the P/E ratio has been adjusted with the economy and with a 10-year moving average and then inverted. Note how this had zero correlation until the 1960s. Somewhere the graphs begin to coincide. McClellan points out that CAPM, as a theory, was launched in the 1960s, which meant that investors increasingly took the interest rate into account.

We know we are losing readers when we write about interest rates. But this is a reminder of why the return on bonds with a high credit rating is so important when analyzing the stock market. Although valuation such as P/E ratios are difficult to use when it comes to timing, the fixed income market often provides guidance. Falling interest rates benefit the stock market. We have had falling interest rates since the 1980s when the Fed chief Volker managed to push inflation out of the system in the US with several interest rate increases.


We do not currently see interest rates rising rapidly. Inflation is back as a factor, as shown by rising commodity prices (see last Weekly Letter). But the Fed is active and knows that rapidly rising interest rates would cause many hedge funds to collapse which would create an underlying concern. This will be the main challenge in the coming months. For an investor, it is of course unpleasant that the return on one’s holdings should be in the hands of a bureaucracy in the United States. But just like the situation and adjust the risk accordingly.


We are entering the weak stock market season May-June now. Looking at some of the world´s leading stock market indices, you can see how momentum has fallen.                                                                                                                       

The Q1 2021 reporting season

The past week has been intense when just over a third of all S&P500 companies have reported their Q1 2021 results. We now have accumulated up to 60 percent of the companies’ result outcome. This is on a par with the last week; 87 percent better on earnings and 78 percent on revenue. IT/Technology is in the best position with the 93 percent of the results better than anticipated, followed by Financials with 92 percent and Cyclical Consumer Goods with 89 percent. At the latter level is also Utilities, but there the revenue levels have not been as good.

Source: Refinitiv Reuters.

If we turn to the Stockholm Stock Exchange and the OMX30 index, the results are about as good as in the United States. When 27 of 28 major listed Swedish companies have reported, 89 percent of the results and 67 percent of their revenues are better than expected. The big theme seems to be that companies have become more cost-effective during the Covid pandemic. It is easy to identify canceled flights, conferences, and hotel rooms as a source of savings.

On the other hand, as we highlighted last week, Swedish engineering companies have achieved better results that ditto in the USA. With that said, the Q1 2021 outcome for US engineering companies has improved over the past week.

Source: Refinitiv Reuters.


The S&P500 index continues to rise at a moderate pace but does not have the strength to overcome the small resistance that has been created. EMA9 as well as rising MA20 serves as a support:


The risk appetite remains high, reflected above in HYG, which shows the risk appetite for high-yield corporate bonds. However, a major source of concern is the Nasdaq. The tech sector has not been particularly strong in recent times. Nasdaq below is now fighting with MA20 serving as a strong support right now. A break and a fall to MA50 would not be good for the morale so keep an eye on this graph!


The Apple stock closed below MA20. The next level is made up by Fibonacci 38.2 around 130.6 USD followed by MA100 currently trading at 129 USD. Note also how MACD has generated a weak sell signal:


Index-heavy Microsoft shares also shows sign of weakness. A break below Fibonacci 23.6 and MA50 currently trading around 243 USD may be next:


Amazon stock is going the other way, but there seem to be sell pressure just above the 3 500 USD-level:


The Euro was hit hard on Friday 30 April by weak GDP figures from the Eurozone countries. The currency pair closed Friday’s trading close to ECB’s magic level of 1.2 versus the USD:


The German DAX index has broken the rising trend line. Continued selling pressure may push the index down to the next level which can be found around 14 800:


Swedish OMXS30 index is holding up though momentum is falling:


A stronger USD is negative news for the gold price that has broken below the rising trend line. The metal is not trading at MA20. In case of a break to the downside, Fibonacci 23.6 and MA50 currently trading just below 1 745 USD per troy ounce may be next.