The Worse Things Get, The More The Stock Market Likes It
No matter how bad things become, stock prices just keep going up and up and up. In 2020, we experienced the worst public health crisis in 100 years, the U.S. economy was plunged into the worst economic downturn since the Great Depression of the 1930s, Americans filed more than 70 million claims for unemployment benefits, and civil unrest raged in major cities all across the United States. Meanwhile, we witnessed the greatest stock market rally in American history. No matter what happened, nothing could seem to dampen the wild euphoria on Wall Street.
To start 2021, many believed that we had finally reached a point when bad news would finally start driving stock prices down. Yesterday, I wrote about how some experts were warning that stock prices could fall substantially if Democrats gained control of the U.S. Senate after the runoff elections in Georgia. Well, in the short-term those experts were proven wrong. In fact, the Dow Jones Industrial Average actually rose 437 points on Wednesday.
Of course the bigger news on Wednesday was the utter chaos that we witnessed at the U.S. Capitol in Washington. Doors and windows were smashed, members of Congress had to be evacuated, and protesters freely roamed through the halls and offices. You would think that something like that would definitely send stock prices plunging, but instead the Dow ended the day up 437 points.
Even though we have just come through the worst year in recent memory, and even though our system of government is in disarray, stock prices hit an all-time record high on Wednesday.
One explanation for this is that investors consider the chaos in Washington to just be “temporary”…
“Although the takeover of the Capitol is shocking, it’s widely perceived to be temporary and contained in scope, at least in the immediate term,” says Yung-Yu Ma, chief investment strategist and managing director at BMO Wealth Management.
“This is going to be dealt with pretty swiftly and won’t have lasting repercussions in terms of disruptions to the government,” Ma added. “It won’t change the trajectory of a Biden presidency in the coming weeks.”
We shall see what happens, but a lot of people out there are not so optimistic that the governmental shaking that we have been witnessing will pass so easily.
Moving forward, investors appear to be salivating at the prospect that a Biden administration will mean that more stimulus money is on the way…