THE US stimulus worth US$1.9 trillion has been approved by the House and waiting to be signed into law by President Joe Biden.
The target timeline to complete the signing on the dotted line is today, March 14, 2021.
That also means that Biden has to execute his pen power in order to continue the issuance of unemployment benefits to low-income Americans after the expiry date.
Last week, Dow Jones market clocked a historical high again on Wednesday, closing at 32,297 points.
The worries on inflation pressure as an eye-washer to long traders have become a bear-trap.
Sometime back, we touched on the irony of inflation in the US economy while many Americans are still cash-strapped due to the high unemployment rate.
Since we are expecting the US stimulus to be rolled out in March, the expanse of this public fund should be able to last for an estimated five to six months.
We expect inflation to build up at strongest level sometime in mid-April to end May when plenty of monies will be used and spent in the market.
Definitely, the Dow Jones market will continue to ascend higher to new heights.
Hence, forget about the foolish news about inflation that could lure you into shorting the market.
However, we foresee the mid-May season will replay the fiasco of “sell in May and walk away”. When most large and medium companies release their first quarter (1Q) season report in May, that is when the meagre and poor results could hammer the US stock market along with rising bond yields.
Of course, it will take no effort to rationalise why companies have not done well in 1Q when the stimulus has only been implemented in the last two weeks of March.
Now, let’s take a look at another angle of the stock markets.
If you spend some time studying the Dow Jones’ constituents list, the top 30 component stocks will easily reveal the highest weighted-ratio of each stock.
When we follow the whole composite index in rising trend, betting on the top five component stocks with highest weighted-ratio will pay you well, generally, as these are the companies that could lift the composite index.
Using the same technique as above, you may run a check on Singapore STI market, Malaysia FBM KLCI market, Thailand SET market or whichever country index you garner an interest. Now, you have found one more good formula to stake on blue chip stocks whenever the bull market rises.
Dar Wong is a professional in the financial industry since 1989. The expressions are solely his own. He can be reached at [email protected].