With no changes to the fundamentals that have driven the markets in recent weeks, the investment strategy that dominates investors’ minds will likely continue during this week, namely the so-called “reflation trade”. In other words, a bet on the sectors of the economy that most benefit from the rise in prices and the resumption of demand, following the gradual opening of the North American economy, but mainly due to the stimulus package proposed by Joe Biden, which is in the process of negotiation in the US Congress, which should cause positive pressure on the purchasing power of consumers in the largest economy in the world, which will eventually give a strong push to the companies most affected by the containment measures, to contain the COVID-19 pandemic.
In addition, investors are already counting on the next spending projects by the Biden administration, which includes an important component of investment in infrastructures, as well as incentives for green energies, and fears of measures are now removed restrictive to the activity of large technology companies, which may compel them to divide their business, within the line defended by the Democratic party. In short, the conditions are created so that the Bulls have more strength to push the indexes towards new historical highs, however, the buying pressure should not be the same in the main Wall Street indices, with the Russell 2000 being able to reap more interest from the capital in the next few days, compared to the technological ones, but with one exception, the semiconductors, which curiously have managed to follow the record of the small caps index this year, both of which have appreciated by around 15%, well above the 5% rise that the S&P500 succeeded in 2021.
