Stocks Keep Rising
On Wednesday, the United States House of Representatives held the 2nd impeachment trial for President Donald Trump. And last Wednesday, riots broke out in the U.S. Capitol. Over the past week or so, there has been a significant amount of political turmoil in Washington. The situation in D.C., combined with the pandemic’s economic consequences, is a one-two punch that not many people expected.
Financial markets have been practically unfazed by the turmoil. On January 6th, the day of the riots, the Dow Jones Industrial Average closed at a record high. And yesterday, the Nasdaq Composite and the S&P 500 closed slightly higher. So, through all the political chaos, why do stocks keep rising and touching all-time highs?
Some argue that investors have long been aware of the United States’ political crises and still see the U.S. markets as a haven during periods of economic uncertainty. The U.S. still has the largest economy globally, and the dollar is still the world’s reserve currency, which is undoubtedly an advantage for the U.S. economy amid so much uncertainty.
GeoQuant is a company that uses computer science to calculate and analyze political risk and their CEO, Mark Rosenberg, thinks investors have yet to be spooked by polarized U.S. politics. GeoQuant’s political risk index showed a 0.9 correlation with the S&P 500, which means stocks tend to boom when measures of political risk increase.
It’ll be interesting to see if the markets stay strong into the new year.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.