After a major hit during the pandemic’s first wave, Wall Street has been on a record-shattering rebound. It is one of the pillars of what economists are calling a “K-shaped” recovery: As investors bagged monster profits from soaring stock prices, layoffs skyrocketed, scores of small businesses closed and millions of Americans slipped into poverty. On the eve of the new year, nearly 20 million Americans remained on unemployment, a jobs crisis worse than during the Great Recession.
On Wednesday, the Dow closed at a record high, even with a mob of President Trump’s supporters storming the Capitol as Congress was set to certify Biden’s election win. Trump has emphatically disputed the results of the election, citing meritless claims of voter fraud, and had encouraged his supporters to march to the Capitol. One person was fatally shot during the melee, and the D.C. National Guard was activated.
Overseas investors also seemed relatively unconcerned about the turmoil: Japan’s Nikkei 225 gained 1.6 percent, and the Shanghai Composite Index gained 0.7 percent. European markets closed in positive territory across the board, led by France’s CAC 40, which gained 0.7 percent.
“With the Democrats now set to control Congress when Joe Biden officially becomes President in a few weeks’ time, the market is now recalibrating the scenario where the future leader has a greater chance of pushing through his policies and thus what the consequences would be on asset classes, economic growth, monetary policy and so on,” Russ Mould, investment director at AJ Bell, said Thursday in an email to The Washington Post. “Previously the market seemed to be content with a situation of government gridlock.”
The mob scenes at the Capitol prompted harsh and unusual criticism from business groups, many of which had applauded Trump’s efforts to cut down on government regulation and corporate taxes during his time in office. Citigroup chief executive Michael Corbat said he was “disgusted” with the rioting, while Stephen Schwarzman, CEO of the Blackstone Group, said he was “shocked and horrified by this mob’s attempt to undermine our constitution.”
The National Association of Manufacturers released an extraordinary statement from its president and CEO, Jay Timmons, saying Vice President Pence “should seriously consider working with the Cabinet to invoke the 25th Amendment to preserve democracy.”
Beyond the condemnations, investors were looking down the line toward the likely priorities of the Biden administration. Many investors worry that the Democratic-controlled Senate — secured this week by the party’s wins in two Georgia runoff elections — might ease the path for tax increases and regulatory changes. But flipping the chamber also increases the odds of more fiscal stimulus, boosting companies that have been hit hard by the coronavirus pandemic and the economic downturn.
“The rally after the November election was attributed to enthusiasm about divided government. By that logic, markets should have sold off in response to the Georgia runoff that ended in one-party rule,” Scott Knapp, chief market strategist at CUNA Mutual Group, said Thursday in comments emailed to The Post. “In markets, there was only one relevant question for both elections: Will there be, in order of importance, more monetary and fiscal stimulus? The answer was a resounding yes after both elections, so the response was the same.”
Bitcoin continued its explosive rally Thursday, trading above $40,000 — doubling in less than a month — and bringing the value of the cryptocurrency market above $1 trillion for the first time. In the past 12 months, bitcoin has soared nearly 400 percent as the global economic slowdown pushed more investors toward alternative currencies.
Gold, an investor haven in times of uncertainty, rose 0.3 percent Thursday to trade at just over $1,913 per troy ounce.
“Markets will continue to focus on the potential Democratic agenda, which should be broadly positive for cyclical sectors,” Jeffrey Halley, senior market analyst with Oanda, wrote in commentary Thursday, adding: “Georgia’s Democrat clean sweep and its ramifications are likely to dominate markets today, with stimulus sentiment well in the ascendant. The buy everything trade is alive and well, if a little noisy.”