The stock market has always loved political gridlock. The reason? I suppose because the more enfeebled D.C. is, the less they can muck things up.
Imagine the likely political situation in which we have President Biden and a McConnell-led Senate. This is almost certainly going to be the case. Green New Deal? Not going to happen. Big tax increase? Not going to happen. Stimulus package to bail out blue states? Not going to happen. At this point, I think Biden could ask for a Hug a Puppy Day commemoration, and they wouldn’t let it through. So there’s going to be this huge government structure in place that gets absolutely nothing done.
As far as Wall Street goes, that’s just fine and dandy, as we’ve seen with the explosive move in equities every since we opened on Sunday……..
Even moreso with the tech sector.
Everything, and I mean everything, is going higher. Financial instruments that are normally inversely correlated no longer are. Bonds? Up. Metals? Up. Stocks? Up. Even gold has finally dusted itself off.
The biggest winner of all is Bitcoin. Back on October 25th, I did this post in which I wrote, in part, “I hate to say it, but I really like how Bitcoin has been shaping up. It’s a huge bullish base, and should it push well off $13,000 – – while it hardly makes rational sense – – it will be off to the races” And here we are, $2,000 higher in no time!!
One asset that may be running out of gas is bonds. Please note the chart below is daily, as opposed to those above, which are short-term intraday charts.
I know the phrase “nail-biter” is being used nonstop right now, and rightfully so, but looking past the nail biting, I think what our future holds is pretty clear: a gridlocked D.C. with a lot of talk and no meaningful action.