Transition to the Biden Administration Has Begun
November 24, 2020
The market traded higher in what appears to be traders covering their positions and needs for this holiday week and as we move forward in the week the trading activity will get less which can lead to bigger one day moves.
Chicago Federal Reserve Bank President, Charles Evans, said he is “optimistic” about the US recovery, but added that there is still “quite a long ways to go” before the economy is back to full strength, and further fiscal support would be helpful.
Optimism over the vaccine continues to be the main driver that is pushing energy markets higher. Markets are forward looking and right now they are assuming a vaccine will put everything back to normal. But the fundamentals will need to support that outlook moving forward with inventories declining to make up for a lack of demand and the possibilities are real for some rough months ahead.
There are some analysts that are looking for a breakdown in the US dollar index, which would be supportive to commodity prices in general, but especially crude. Their outlook on the dollar offers a scenario to support energy prices regardless of other factors.
The PMI Flash Index for manufacturing came in with a reading of 57.9 versus a reading of only 55.6 expected for November. This was positive news for markets.
The current outlook is still that OPEC+ will not increase production in January as their original plan calls for but keep the current cuts in place for three months. OPEC meets next week.
Also offering some support to prices is that news that Republicans and Democrats are back to discussing another potential stimulus package.
The General Services Administration acknowledged Biden as the apparent winner of the vote and has allowed the transition to begin which the market is taking as positive news. Also, the Biden camp has announced that Janet Yellen will be the Treasury secretary and the market also sees this as a positive.