On March 23rd local time, US President Biden signed a $1.2 trillion government funding bill that will provide funding for US defense, financial services, homeland security, education, and other related institutions to prevent them from being shut down due to funding issues.
In terms of the capital market, recently, the US stock market has maintained high volatility after hitting new highs, and the market is concerned about the trend of the US stock market. Next, how will the US stock market operate?
Just now, Global Times quoted a report from the US Political News Network that US Treasury Secretary Yellen will visit China in April. However, the above news has not been officially confirmed.
Take a look at the detailed report!
Biden signs the bill
According to Global Times citing Consumer News and Business Channel (CNBC), on March 23 local time, US President Biden signed a $1.2 trillion government funding bill to ensure that government funding continues until October 1 and avoid partial government shutdowns.
The above budget combines six expenditure bills and will provide funding for approximately three-quarters of government departments, including defense, financial services, homeland security, health and public services, education, and the United States Department of State. The budget of the Ministry of National Defense reached $886 billion, an increase of 3% from the previous fiscal year, while non defense expenditures remained largely unchanged. According to Reuters, the newly passed budget does not include foreign military aid expenditures, which are included in another separate budget that has been passed by the Senate and shelved by the House of Representatives.
Previously, on March 22 local time, the US House of Representatives passed this $1.2 trillion government funding bill with a vote of 286 in favor and 134 against. However, due to differences between the Democratic and Republican parties on some bill amendments, the Senate was unable to approve the bill before midnight on March 23, resulting in a brief technical shutdown of some federal government agencies. With Senate Majority Leader Chuck Schumer announcing a bipartisan agreement, the Senate ultimately approved this spending package with 74 votes in favor and 24 votes against after midnight on the 23rd.
It is understood that the US fiscal year starts on October 1st and ends on September 30th of the following year. In the past six months, the US federal government has mostly relied on short-term temporary fiscal measures to fill the fiscal gap. Some international rating agencies have warned that the government's finances are frequently in crisis, which could damage the credibility of the US government, as it carries $34.6 trillion in debt.
The last time the United States suspended some federal departments due to a lack of money occurred from December 22, 2018 to January 25, 2019, which was the longest lasting "government shutdown" event in history. That was during the presidency of Republican President Trump, when Republicans insisted on spending money to "build walls" along the US Mexico border to block illegal immigration, leading to a dispute with the Democratic Party.
How will the US stock market go?
In terms of the capital market, the US stock market has recently hit new highs, but major stock indexes have maintained high volatility in the past two trading days, causing concerns about the trend of the US stock market.
Chen Guo, Chief Strategy Officer of CSCI, believes that the risk of US debt is relatively small in the short term, and there is still room for "fiscal easing" policy; Although the US banking industry still faces challenges, it will not evolve into a systemic crisis. The overvaluation of MAG7 (Technology Seven, referring to Microsoft, Apple, Nvidia, Amazon, Google, Meta, Tesla), which is currently a concern in the market, is mainly driven by strong profit expectations. PEG is still in a reasonable range, but the high concentration of MAG7 trading may lead to amplified periodic fluctuations.
Chen Guo pointed out that there were no significant fluctuations in the US stock market in the first half of this year, and the real variable may lie in the impact of the US election on the stock market in the second half of the year. It is expected that this year's election will have strong uncertainty and will bring significant fluctuations to the stock market.
This year's election situation is expected to be more uncertain, with poll data showing that Trump's approval rating is slightly ahead. The latest national opinion poll conducted by Real Clear Politics website shows that Trump's approval rating is slightly ahead of Biden by 2 percentage points. According to a survey by The New York Times, Trump's approval rating is slightly ahead of Biden by 4 percentage points. The immigration issue is a significant factor affecting Biden's approval rating. According to a CBS poll, 45% of respondents believe that the border is in crisis, 50% link Biden's re-election to an increase in cross-border immigration, and 72% believe that Trump's re-election will help reduce immigration. Chen Guo stated that although Trump's approval rating is currently slightly ahead, the election results for this year are still uncertain and are expected to cause significant fluctuations in the US stock market. It is recommended to focus on the impact of the general election in the second half of the year on the US stock market.
Previously, major Wall Street firms including Goldman Sachs and Bank of America had warned that the current rise in the US stock market was supported by a few heavyweight stocks (mainly technology stocks), indicating that the market was "getting narrower as it rose.". According to the latest research report of HSBC, the current rise of US stocks is indeed "highly concentrated", but the strength of technology stocks has not sent a signal of foam. In fact, the phenomenon of "concentrated gains" is not limited to the US stock market, and the concentration of some major global stock indices is much higher (such as the Danish biopharmaceutical stocks). HSBC pointed out that the profit margins and momentum of large enterprises are currently strong, and the momentum is even recovering. At present, there is almost no similarity with the upsurge of scientific and technological Internet in the late 1990s.
The HSBC analyst Max Kettner team believes that although the current market environment seems to be at the end of an extreme cycle, and it seems that the foam is about to burst, all kinds of signs indicate that we may actually still be in the early stage of the economic cycle. From the results, the report said that, compared with the peak in January 2022, the cumulative increase of US stocks was actually only 9%, and since that time, the nominal GDP of the United States has increased by more than 13%, which indicates that the economy is still on the track of steady growth and does not conform to the characteristics of the eve of the bursting of the "foam". HSBC stated that for broader risk assets such as stocks, whether the Federal Reserve will cut interest rates twice or three times is a binary issue: as long as interest rates are lowered, the stock market will not experience a reversal.
Yellen will visit China again?
According to Global Times citing Political News on March 23 local time, two US government officials familiar with itinerary planning told the media that US Treasury Secretary Yellen will visit China in April.
The report stated that these officials were not authorized to speak publicly, and they did not disclose the details of Yellen's visit schedule and meeting agenda. However, in recent months, Yellen and other senior officials from the Ministry of Finance have hinted at Yellen's priorities related to China this year in speeches and interviews. Yellen stated in a speech in December last year that face-to-face meetings with senior Chinese officials are crucial for the US government's efforts to "responsibly manage" bilateral relations.
Bloomberg reported on February 7th that on the occasion of the third meeting of the China US Economic Working Group, the US Treasury delegation attending the meeting expressed to China that US Treasury Secretary Yellen hopes to visit China this year. The report describes that this indicates that the relationship between the two economic superpowers of China and the United States is further stabilizing.
Yellen visited China from July 6th to 9th last year. Yellen posted on social media Twitter (now X) on the 10th after concluding her trip to China, stating that she believes that during this visit, the United States and China have made progress in deepening communication.