With unified Democratic control, fiscal stimulus looms large in 2021

The big thing I am focused on as we begin 2021 is: Will the cyclical rotation trade, which was the dominant market trend during the last two months of 2020, continue. With Democrats taking the Senate following the Georgia elections on January 5, the new fiscal stimulus that is likely coming could potentially be a catalyst for a continuation of the trade. The premise for the cyclical rotation trade is that the recovery will boost the fortunes of sectors that lagged in 2020, when markets were driven primarily by monetary stimulus to combat the pandemic’s economic shock. This trade anticipates raised inflation expectations, higher commodity prices, a weaker U.S. dollar and a steeper U.S. yield curve.