Wednesday’s riots that overtook Capitol Hill and led to at least four deaths horrified most Americans. It did not stymie bulls on Wall Street.
MANHATTAN (CN) — At about 2 p.m. on Wednesday, rioters, spurred on by a fiery speech from President Trump, broke into the Capitol building, clashing with police in a deadly horror broadcast in real time.
Two hours later, even as lawmakers and staffers remained barricaded in offices and the rotunda, investors hardly blinked an eye as the closing bell rang out on Wall Street.
“The chaos at the Capitol yesterday, while disturbing to watch regardless of political viewpoint, doesn’t change the fact that stimulus and the continued vaccine rollout remain two powerfully positive tailwinds on stocks,” wrote Tom Essaye of the Sevens Report.
The chaos is not over. President Trump, who has finally promised a peaceful transfer of power, now faces a potential second impeachment or removal via the 25th Amendment. Conspiracy theories that the president will somehow net a second term still remain, however, and rancor among lawmakers remains high.
A number of administration officials have resigned over the president’s actions, including former chief of staff Mick Mulvaney and Transportation Secretary Elaine Chao. Several other current and former cabinet officials have officially rebuked the president, with recently resigned U.S. Attorney General William Barr calling the Trump’s actions “a betrayal of his office and supporters.”
Residual chaos or no, investors remained chipper on Thursday. The Dow Jones Industrial Average gained 215 points, a 0.7% rise, while the S&P 500 gained nearly 1.5%. The Nasdaq marched ahead with more gains, breaking the 13,000-point ceiling to set a new record at 13,068 points, a 2.5% increase for the day.
Earlier this year experts waved away concerns that Wall Street is detached from the plight of Main Street and disruptive social events — such as the George Lloyd protests — and they did so again on Thursday.
“There should be no mystery as to why the markets didn’t care about what happened in the Capitol yesterday, however disturbing, disgraceful, and embarrassing it was,” wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group. “It’s because it has no bearing on the direction of the economy, earnings, and interest rates. It’s that simple.”
World leaders were aghast at the spectacle, but world markets also took the infamous event in stride, with most Asian exchanges up — including Japan’s Nikkei, which hit another 30-year peak — and nearly all major European indices gaining.
Others say the market was more interested in the ink drying on Joe Biden’s electoral certification than any political turmoil — even if it involved death and destruction.
Stephen Innes, chief global market strategist at AXI Trader, wrote on Thursday that “there is a growing sense of relief among investors that the final election hurdle has crossed, but the markets are slowly coming to terms that this might be the best-case U.S. Senate outcome via a stimulus perspective.”
Innes added that “there’s still a lot of wood to be chopped over the next few weeks,” but that the market is “ironing itself out quickly.”
Charlie Gasparino, a conservative commentator for Fox Business, agreed Wednesday that markets are rallying because Trump is toast. “One reason I think they’re up is they see how unhinged he is, and they see Biden as possibly stability,” Gasparino said.
Despite earlier worries that a Democratically controlled Senate, coupled with a Biden presidency, would be less desirable than a split government, markets reacted positively even before the riot.
After Democrat Raphael Warnock late Tuesday night was declared the winner of one of the two U.S. Senate seats up for grabs in Georgia run-off, the next morning the Dow steadily gained, at one point picking up more than 600 points. The Dow settled at a 438-point increase on Wednesday, even as it seemed likely Jon Ossoff beat Republican David Perdue for the second seat.
The S&P 500 gained slightly at Wednesday’s closing bell, while the tech-heavy Nasdaq — which many believe was the likeliest to drop due to the possibility of more stimulus money flowing into the economy — fell only about 60 points.
Some experts say a third round of stimulus checks would actually lead to a GDP lift. “Our pre-election scenario analysis showed that Bidenomics could lift real GDP growth by around 1.2 percentage points,” wrote economists Nancy Vanden Houten and Gregory Daco of Oxford Economics.
Democrats would need only the 51-seat majority they now have to pass with reconciliation a new round of stimulus checks and unemployment benefits.
The major U.S. indices began the week in a minor tailspin, each losing more than 1 percentage point on continued worries about the Covid-19 pandemic.
To date, nearly 87 million cases of Covid-19 have been reported worldwide, with nearly 1.9 million deaths, according to data compiled by Johns Hopkins University. In the United States, 21.4 million Americans have contracted the disease, while more than 363,000 have died.
Sadly, some in the investment sphere had predicted political violence before Wednesday. In a post on his LinkedIn page, hedge fund billionaire Ray Dalio — whose son was killed in a December car crash — wrote that the United States is now at the final stage before civil war.
“Will populism and fighting between extremists go past the point of no return?” Dalio wrote, noting that during a civil war or revolution a government in power has major debt, an acute shortage of money, and foreign powers trying to influence it.
In an interview on CNN, Dalio continue his thesis: “The worst alternative is that one side or another says, ‘This isn’t my country anymore. This isn’t my population,’” Dalio said.