Financial markets look past the chaos at the capitol – What do we Know?


There’s no doubt that the siege by Donald Trump supporters on Capitol Hill stunned the world as the incumbent President’s unsupported claims of voter fraud finally yielded a reaction from the electorate.

Of course, the action of the pro-Trump mob completely distracted from the fact that Joe Biden was officially confirmed as the 46th President of the United States, with the Democrat set to be sworn into office on 20th January.

Fortunately, the markets were able to look beyond the mayhem at the Capitol to see fresh economic stimulus, resulting in a boost for various asset classes. Here’s a breakdown of the markets in the wake of the recent chaos.

US Stocks Continue to Hit Brand New Highs

It should come as no surprise that equities in the US are soaring on the back of increased demand, with the barriers that seemed to stand in the way of a smooth Presidential transition having now been removed.

Make no mistake; these were weighing heavily on the market, from Trump’s sustained legal challenge on the result of the November election to the sitting President’s apparent refusal to commit to a seamless transition of power.

Shortly after Biden’s confirmation and the chaos at Capitol Hill, however, a seemingly sheepish Trump finally pledged an orderly transition on 20th, although he also confirmed that he wouldn’t be attending the new President’s inauguration.

Even the decision of stocks such as Facebook and Shopify to ban Trump from their platforms couldn’t devalue their shares, with these entities holding onto their earlier gains and continuing to perform robustly throughout the first weeks of January.

From a longer-term perspective, it’s also thought that a more orderly transition for Biden will enable him to implement his coronavirus containment strategy at a far greater pace, with this also paving the way for sustained economic stimulus and and Democrat’s relatively progressive infrastructure spending plan.

What About Indexes and the US Dollar?

Indexes have also continued to perform well since Biden’s confirmation, with the most recent ISM Services reading looking far better than it did at the end of 2020.

More specifically, this came in far higher-than-expected at 57.2, with this considerably outperforming the consensus estimate of 54.5 and even the previous reading of 55.9.

Of course, the rollout of increased Covid restrictions under the Biden administration during the first quarter could well begin to weigh on this index next month, and this may check the indexes growth in the near-term.

According to Edward Moya, the Senior Market Analyst at Oanda, the dollar has also rallied in light of the recent developments at the Capitol and increased inflation expectations.

These have sent Treasury yields higher, enabling investors to adequately cover their previously bearish greenback bets at the beginning of the year.

There’s no doubt that the dollar could see a substantial bounce during the first half of 2021 overall, with the prospect of aggressive stimulus measures from the new President underpinning such price movements.

As for Bitcoin, Biden’s confirmation continued the asset’s incredible growth, with the token achieving new highs having broken through the $40,000 barrier for the first time.

However, this volatile asset has since plunged to just above the $30,000 mark, with many economists believing that this represents more of a natural correction rather than part of a wider or more troublesome trend.

The good news is that the token may be poised to bounce back somewhat once Biden’s premiership gets underway, particularly as stimulus measures begin to take hold and boost the overall economy.