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Stimulus checks are out this weekend – Dow and Bitcoin hit a record high on Friday

Written by Leonardo Hadi
· 4 min read >
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Disclaimer

What a stimulus package

Biden signed the $1.9 trillion “American Rescue Plan” into law on Thursday, and the stimulus checks will start going out this weekend. The COVID-19 relief bill marks Biden’s presidency’s most significant milestone after being sworn into office in January. The stimulus package includes $1,400 direct payment to most Americans, $300 per week unemployment insurance, $20 billion into vaccine distributions, and $350 billion funding to local governments.

Read more: The full break down of the $1.9 trillion stimulus package

In his speech, Biden emphasizes that the stimulus package targets the governments and individuals rather than big corporations. He focuses on the working people and middle-class families to rebuild the economy after the devastating pandemic. However, the stimulus bill will support severely impacted businesses and industries during the economic lockdown. The fund will provide grants for restaurants, entertainment venues, airlines, but excluding gym and fitness centers.

Direct Deposit

The stimulus checks will start hitting the US banking system this weekend and be available to qualified individuals immediately. The first batch of the $1,400 stimulus checks will reach the bank account for the individuals who have direct deposit information on the IRS database from the previous year’s tax returns.

It is the third round of the Economic Impact Payments for the US citizens who filed their taxes with IRS [1]. The US tax agency will use the 2020 tax returns information to determine the check amount, and the US Treasury will mail the checks for those who do not provide direct deposit information to the IRS.

Who’s eligible?

According to the IRS, the relief bill allows a total $1,400 one-time payment for individuals with a gross income up to $75,000, head of household up to $112,500, and $150,000 for total household income for married working couples. Reduced payments will apply for individuals with gross income up to $80,000, $120,000 for the head of household, and $160,000 for working married couples [2].

Read more: Third Stimulus Check Calculator: How Much Will You Get?

Markets

Up/DownMarketPrice/YieldGain/Loss
S&P 5003,943.34+ 0.10% (+4.00)
Dow 3032,778.64+ 0.90% (+293.05)
NASDAQ13,319.87– 0.59% (-78.81)
Russell 20002,352.79+ 0.61% (+14.25)
VIX20.69– 5.57% (-1.22)
US 2-YR0.14%
US 10-YR1.64%+ 10 bps
US 30-YR2.40%+ 11 bps
OIL65.56– 0.70% (-0.46)
GOLD1,725.80+ 0.19% (+3.20)
Bitcoin61,080.50+ 7.3% (+4,160.5)
As of Market Close on Mar. 12, 2021. Bitcoin price is based on Mar. 13, 2021 record.

Stock Market

S&P 500 – S&P 500 was trading flat after the market closed on Friday. The index that measures the performance of the top 500 companies listed on the US stock exchanges only gained 4 points from the previous closing day because technology stocks that fall into the correction territory dominate the index’s weight. Furthermore, Tesla, the sixth-largest company in the S&P 500 index, lost nearly $180 billion in market capitalization from the all-time high in Jan. 2021. The S&P 500 index moves 1 point for every $11 Tesla stock movement [3].

Dow 30 – In contrast, the broader index continues to gain momentum after Biden signed the third COVID-19 stimulus bill. Dow 30 hit a record high and was up to nearly 300 points after the market close last week. The index carries less weight in technology stocks and more in COVID-19 impacted stocks like energy, retails, and airlines. Oil and gas companies rebound from the dip as the demand for energy increases as the economy reopens. Simultaneously, the investment for maintaining production supply decreased as oil and gas companies consolidated during the pandemic.

Nasdaq – The technology stock index continued to fall into correction territory after rebounding last week. Nasdaq dropped nearly 80 points on Friday, or equal to 0.59%. The sharp rise of the 30-YR Treasury bond yield has put a lot of pressure on the technology stock valuation. The long-term Treasury bond yield increased the discount rate to calculate the net present value of a stock. This condition will lower technology stocks’ intrinsic value as low bond yield influences the rise of technology stock price during the pandemic.

Russell 2000 – The small-cap index significantly outperformed Nasdaq and S&P 500. Russell 2000 index skyrocketed by 18% since the beginning of 2021, while Dow, S&P 500, and Nasdaq only gained between 3.9% to 7.9%.

Volatility Index – VIX has dropped by 5.57% after the fear of inflation diminished. However, the shape increase of 30-YR Treasury bond yield will increase the mortgage rate, indicate a booming economy, and signal inflation.

Bond Market

The increasing spread between the short-term (2-YR) and long-term (10-YR) yield indicates the return of normal economic conditions and drives the yield curve’s steepening. The sign indicates that the investors expect rising inflation and stronger economic growth in the future.

The climb of the long-term yield for both 10-YR and 30-YR Treasury bonds stipulate the capital flight from the bond market to more risky assets such as the stock market and cryptocurrency. However, the higher long-term bond yield has put a lot of pressure on the overvalued sector like technology as the high net present value depends on the low long-term bond yield.

Read more: Steepening and Flattening Yield Curves as Indicators

Oil

Oil price is hovering around $65 per barrel to assess the impact of the stimulus package and the economic reopening. OPEC sees strong global oil demand in the second quarter of 2021. The lack of investment in the new hydrocarbon sources will also impact the global supply after the inventory starts depleting, driven by the higher consumption in the summer months. The stock price correction of oil and gas companies will continue in the second quarter. The undervalued energy stocks will correct at a higher price level, while the overvalued green energy stocks will hit a lower price level.

Gold

Gold jumped slightly higher to $1725 per ounce as the 10-YR, and 30-YR Treasury bond yield increased, indicating economic expansion and inflation. Traditionally, gold is the main hedging instrument against the inflationary effect of the fiat currency. However, gold’s performance has been dampened by the rise of cryptocurrencies like Bitcoin. Gold has been underperformed against Bitcoin in recent months.

Bitcoin

Since last year, Bitcoin has rallied nearly 600% and hit more than $61,000 with $1.118 trillion in market valuation on Friday. Bitcoin has outperformed gold by 7% as it gains more popularity among the Millennials and first-time traders to hedge the risk of inflation of the government-issued currencies. The easy money-printing policy, high US debt-to-GDP ratio of 145%, and $28 trillion national have accelerated the devaluation of fiat currency and motivated investors to diversity their cash holding, including buying more Bitcoin.

Besides, the launch of Bitcoin ETF increases the market reach and liquidity among the market players who previously do not have exposure to cryptocurrency. The Bitcoin ETFs are only available in Toronto Stock Exchange and currently under regulatory review in the US. Among them are BTCC, QBTC, and EBIT.

Read more: BTCC is the first Bitcoin ETF

Netflix -The media streaming giant cracks down on password-sharing to eliminate the number of freeloaders. With 200 million subscribers globally, Netflix will test a feature to verify if the user shares a household with the account holder.

CRA – Canadian Revenue Agency will lockout about 800,000 accounts to deal with cybersecurity risk. The agency discovered that some usernames and passwords had been obtained by unauthorized third-party. The tax agency dealt with the first security breach late last year, resulting in locking out more than 100,000 accounts.

SpaceX – The rocket company is preparing the Starship SN11 Test Flight for Mar. 16, 2021 launch after the successful landing of SN10, followed by an explosion shortly after. The company has successfully launched the 60 Starlink satellites to orbit as part of its global mission to provide high-speed broadband internet to every corner on Earth.

Photo by: WP

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Written by Leonardo Hadi
MBA from the University of Illinois at Urbana-Champaign. Quantitative Fund Investor. Professional Engineer. Operations Professional. Profile

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