Investor Disappointment with Biden Stimulus Sends S&P 500 Lower

Two weeks ago, the U.S. stock market seemed taken with the idea of the Biden administration's promise of trillions in new spending for coronavirus pandemic relief, sending the S&P 500 (Index: SPX) to a new record high.

But that changed last week, after the incoming Biden admininstration announced its stimulus package would total $1.9 trillion, which requires rounding upward to count as "trillions". Worse, the details of the proposal indicate that much of these funds will be spent wastefully. The measure also aims to boost the federal minimum wage to $15 per hour, which while expected to benefit 1.0 million Americans, would contribute to a projected loss of 1.3 million jobs.

Overall, investors were left with the disappointing impression that the Biden stimulus will do little to improve the nation's economic situation, which increases the uncertainty that it can pass in its current form.

That increase in uncertainty led investors to shift a portion of their forward looking focus of investors from 2021-Q2 inward to the current quarter of 2021-Q1, sending stock prices down from the previous week after the details of the Biden stimulus were announced. The latest update to the alternative futures chart based on the dividend futures-based model shows that shift.

Alternative Futures - S&P 500 - 2020Q4 - Standard Model (m=+1.5 from 22 September 2020) - Snapshot on 15 Jan 2021

In other news, the minions of the Federal Reserve were especially active in trying to shape future expectations, which for them, means little-to-no change in monetary policy in 2021. Here are the headlines we noted for their market-moving potential during the second week of January 2021.

Monday, 11 January 2021
Tuesday, 12 January 2021
Wednesday, 13 January 2021
Thursday, 14 January 2021
Friday, 15 January 2021

Want a second opinion on what the big news items of the past week were? Barry Ritholtz delivers the positives and negatives he found in the markets and economics news the way only he can!

Also, if you ever need to put a picture together of events that influenced the U.S. stock market, check out the earlier entries of our S&P 500 chaos series. Political Calculations is your curated resource for market history in near-real time!