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  • All three major indices rose to and closed at all -time intra-day highs.
  • Big tech names led the charge, seemingly stoked by strong Netflix subscriber gains.
  • Unwinding of hedging after a smooth transition of Presidential power in the US was also suggested as a positive.

The S&P 500 closed with gains of about 1.4%, the down with gains of about 0.8% and the Nasdaq 100, which led the pack, with gains of around 2.3%. All three hit fresh all-time intraday and closing highs, with the S&P 500 surging and closing above 3850 for the first time ever, the Dow powering back above 31,000 and the Nasdaq 100 flying back above 13,000 to close just under 13,300.

Big tech names led the charge on Wednesday (hence Nasdaq 100 outperformance), with Netflix finishing the session up 16.85% to hit all-time high levels following Tuesday’s after-market earnings released that showed the entertainment service gaining subscribers at a much faster than the anticipated rate in the fourth quarter. This seemingly gave tailwinds to other major Tech names (Apple +3.3%, Microsoft +3.7%, Alphabet +5.4%, Facebook +2.4%, Amazon +4.6% and Twitter +3.6%).

Elsewhere, things were a little more mixed but the tone was broadly positive, aside from in the banking sector, which was weighed by falling real yields as a result of rising inflation expectations. Some desks argued that in wake of the completion of a smooth transition of power from the Trump administration to the Biden administration, some unwinding of hedges could have played into strength seen in the stock market.

In terms of other macro drivers, pandemic news took a back seat, but there were some interesting updates. Somewhat pessimistically, Bloomberg reported that the US President Joe Biden’s team is increasingly worried the coronavirus pandemic is spiralling out of control and there is concern that this might imperil his promise to contain the outbreak. Biden’s team is reportedly particularly worried about lagging vaccinations and the spread of a more transmissible strain in the country.

Even if the next few months do go worse than markets are currently pricing in given the above, equity markets continue to discount the downbeat near-term economic outlook in favour of optimism regarding US economic performance during the second half of 2021, assuming vaccines deliver a strong degree of immunity.