Investment Update: January 6, 2021Submitted by Affinity Capital on January 6th, 2021
While we prepare an Investment Update discussing our year-end review and a look forward, we want to provide an update on what is happening currently in the Capitol and what that may mean for the markets.
First, on a personal note, we would like to thank all our clients and friends for your prayers and well-wishes for my son -and Ann’s nephew- following a very serious auto accident. Chase and two friends were outside of Amarillo driving into Palo Duro Canyon State Park to hike when they were struck almost head-on by a driver who had lost control of her car. We are thankful that his two friends, while injured, were treated and released that day. Chase has a long list of serious injuries after being trapped in the overturned car for an hour and hospitalized for several days following surgery. While he has a long road ahead, he is expected to fully recover. The first responders on-scene and the hospital staff that cared for them are the truest of heroes.
The major event of today is the storming of our Nation’s Capital by protestors as lawmakers met to certify the Presidential election with some debate expected. Proceedings are expected to resume tonight.
Both Georgia Senate races will go to the Democrats providing control of the House, Senate and White House. The Senate will be divided 50/50 with Vice-President Kamala Harris as a tie breaking vote. While the markets generally prefer divided government, one party rule is quite common throughout the history of our nation and our investments have prospered throughout these various scenarios. We strive to be apolitical and simply address how events may affect the markets and therefore your hard-earned portfolios
Our next Update will look at potential policy changes such as potential corporate tax-hikes and a likely one trillion-dollar stimulus package. Hint: The markets may not like higher taxes, but they will like government stimulus.
Both events began unfolding during market hours. The markets were little affected. The Dow closed up 437 points or plus 1.44% and the S&P 500 was lower by 21 or plus 0.57%. The tech heavy Nasdaq weakened to close down 78 points or down 0.61%.
Whatever the markets leaned toward concerning an expectation for divided government, we do not believe any market reaction in either direction over the next few days or weeks would be outside the norms. After a significant rise, the markets are near historic highs. In our estimation, a correction of 6 % would be a normal pullback. Conversely, the markets may react favorably to the simple fact that the Georgia races appear to be over. As this is being written, stock futures for tomorrow are in fact higher.
Regardless of news, it is uncertainty that rattles the markets. While either a short-term sell-off or rally in response to immediate news is normal, the markets are always looking ahead in measures of months and years. Today made that abundantly clear when the markets reacted only slightly to such a major event. Simply look to the past year with the coronavirus, acrimonious political campaigns, a crash in energy prices and much more – yet here we are sitting at historic market highs.
As always we are here for you to answer any questions you may have. Stay safe.