Jan 7, 2021 - Economy & Business

U.S. markets unbothered by Capitol insurrection

Data: FactSet; Chart: Axios Visuals
Data: FactSet; Chart: Axios Visuals

U.S. stock prices were generally higher on Wednesday and riskier assets in most markets rose as investors showed little worry about protests in Washington, D.C. that devolved into violence and looting at the nation's capital by supporters of President Trump.

What happened: "The market primarily is looking at an economic recovery in the second or third quarter and hasn’t seen anything in the pandemic or political situation to change that view," Joseph Trevisani, senior analyst at FXStreet, tells Axios.

  • Traders were much more focused on victories by Democrats Raphael Warnock and Jon Ossoff in Georgia's runoff elections that will likely mean more relief funds, including increased direct payments of $2,000 to Americans that expected Senate Majority Leader Chuck Schumer has said is a top legislative priority, he added.
  • "The stuff in D.C. is not a serious event and I don’t think anyone’s taking it seriously. There will be no long-term political ramifications as far as the political transition in a few weeks."

In fact, Wednesday's chaos dashed "any lingering uncertainty about a transition of power in D.C. come Inauguration Day," Danielle DiMartino Booth, CEO of Quill Intelligence, says in an email.

  • "Investors received verification that the recently enacted $908 billion relief bill is but a down payment on stimulus spending to come."

One level deeper: The 50-50 split in the Senate paves the way for three things the market likes — more stimulus, a more difficult path for tax increases and a very likely confirmation of former Fed chair Janet Yellen as Treasury secretary.

The bottom line: There are four factors at play, Gregory Daco, chief U.S. economist at Oxford Economics, tells me on Twitter (also noting that a "coup d'état is only worth -0.6% on the #SP500, & we're only 0.2% from the all-time high close"):

"1. Chaos/violence banalized
2. Assumption that unrest is transitory (14 days)
3. Georgia wins for Dems mean more fiscal stimulus coming
4. Fed put is solidly in place"
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