This Week Highlight - The Post Effect on U.S. Stimulus

 The U.S. stimulus worth USD1.9 Trillion has been approved by the House and waiting to be signed into law by President Biden. Target timeline to complete the signatory on the dotted line is today, 14 March 2021. That also means President 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 the historical fresh high again on Wednesday when it closed at 32,297 points. The worries on inflation pressure as an eye-washer to long traders have become a bear-trap. Sometime back, we have mentioned in this snippet on the ironical sarcasm of inflation in U.S. economy while so many Americans are cash-strapped due to loss of jobs.

Since we are expecting the U.S. stimulus to be rolled out in March, the expanse of this public fund will be able to last for estimate 5-6 months. Practically, we expect the inflation will 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 persist to ascend higher at fresh records with such loose monies. Hence, forget about the foolish news that stress on inflation and 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 Q1 season report at the turn of May, that’s when the meagre and poor results will hammer the U.S. stock market together with rising Bond yields. Of course, it will take no brains to rationalise why the companies have not done well in Q1 season when the stimulus has only implemented in the last 2 weeks of March.

Now, let’s take you into another angle when we ogle at the stock markets. If you spend some times into studying the Dow Jones constituents list, the top 30 component stocks will easily reveal the highest weighting-ratio of each and every stock in the list. When we are following the whole composite index in rising trend, betting on the top 5 component stocks with highest weighting-ratio will pay you well generally since these are the companies that together lift the composite index.

Using the same technique 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. 

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