Count Down to the Inauguration
I apologize for the unavoidable dark tone this week. We thought about revising last week’s newsletter in lieu of Wednesday’s violence at the Capitol building in Washington DC, but we figured the impact of this attempt to overthrow a free and fair election would continue in our discussions this week. And we were right.
Analysts say this is the beginning of 2 weeks that we all anticipate to be intense with the FBI’s memo warning of threats of armed protests planned at state capitols as well as Washington DC along with a historic second impeachment. On Wednesday Trump faced impeachment for the second time, the first time in US History for a US President to be impeached twice. Enough House votes were secured to pass the article of which ten Republican House members approved.
As the impact of January 6, 2020 became more transparent through videos and reporting by very courageous journalists, the degree to which the insurrectionists could have succeeded became clearer. One capitol police officer led these domestic terrorists away from a doorway leading to the Senate floor. Arrests are being made around the country from easily identifiable individuals who proudly participated and are now being charged with Federal crimes. Yesterday, we were made aware of up to 15 capitol police officers being investigated for collaborating with the terrorists.
Markets
As far as markets are concerned, and the reality is, it could have been worse - thankfully it was not. The electoral process completed as Constitutionally enumerated in spite of the condemned violence and evacuation. A second impeachment is the consequence for the President. Mitt Romney was very insightful in his testimony stating that if a committee was appointed to investigate the election, it’s unlikely any insurrectionist would believe the lawful conclusion. The only remedy is for all office holders to tell the truth. Our hope is that with calls for unity that temperatures cool and continue to cool once the new Biden/Harris administration is inaugurated January 20th, 2021.
US Treasury Rates
Since the runoff contests in the state of Georgia, and the Democrat candidates were declared victorious, US Treasury rates have increased dramatically with the US Treasury curve steepening sharply. That means interest rates from 3 years to 30 years maturity have increased significantly. Further fiscal relief, as promised by the Biden administration is the main impetus. After hitting a record on Friday, the S&P 500 sold off a small amount earlier this week, a result of interest rate increases as well as a bigger regulatory threat for big tech, the leaders of the record setting 2020 market moves. Cyclical sectors such as financials and energy bucked the rest of the market trend by moving higher.
The attempted and failed insurrection has pushed the pandemic lower on the headlines but the Covid19 situation continues to deteriorate now revealing the impact of the holiday surge.
Signs of hope:
- Biden/Harris inauguration in less than one week
- Fiscal relief in the next 50 days
- Vaccines widely distributed by late Spring/Summer 2021
- Markets are looking forward to recovery in the Spring/Summer 2021
- Risks have gotten so bad that it is more likely a consensus for saner politics having a greater chance of succeeding than without these extreme events
- Major corporations and sporting events and personalities are withdrawing contributions, refusing medals (Bill Belichick), and lastly banks are ending their relationships with Donald Trump.
Recency bias
And remember when times are challenging, they feel like they will be challenging forever, and when times are good, they feel like they will be good forever, neither is certain. We have to be better prepared for future violence in the hope it will never happen or if it does, it will be contained and those responsible will be arrested and held accountable.
2021 has gotten off to a bumpy start- shocking, but not surprising!
