The markets have remained resilient over the past week, despite seemingly “unfavorable” news. A second impeachment, higher-than-anticipated unemployment numbers, and the continued fallout from last week’s protests at the Capitol could have easily derailed the markets. Instead, there was continued optimism surrounding President-elect Biden’s stimulus plan, Johnson & Johnson’s COVID vaccine edging closer to approval, and initial positive news on corporate earnings.
1.) Tension in Washington - President Trump became the first U.S. President to be impeached twice, as the House of Representatives voted in favor of impeachment on Wednesday. That said, Senate members will not be called back prior to Jan. 19th, meaning that the President should serve out the remainder of his term. The markets treated this news similarly to the Presidential Election news and the Georgia Senate runoff news. Rather than fall victim to headline risks, the stock market continued to focus on good news surrounding equity fundamentals and forthcoming stimulus.
2.) New Data – Some new information emerged this week regarding two separate topics. While corporate earnings will begin to be released over the next several weeks, many companies have issued early releases indicating an optimistic tone about their upcoming quarterly numbers. Companies that have issued positive pre-earnings comments include Union Pacific, Lululemon, and Samsung, among many others.
The other piece of data that was released indicated that first-time unemployment claims jumped by almost 200,000 from the week prior - a total of 965,000 new claims. While this number is significantly lower than mid-2020 levels, it is still the largest total since August of last year. Even this piece of information did little to rattle the markets, as this decline in economic activity is expected to be met by additional stimulus.
3.) Biden’s Stimulus Plan – President-elect Biden unveiled the details of his COVID relief plan, with the total cost of the package estimated at $1.9T. Elements of the plan include additional stimulus checks for individuals, amendments to expiring unemployment benefits, and increased spending on vaccine development and rollout. The time frame for Congress to debate and vote on the plan is unclear.
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