Stocks soar as Wall Street looks past Washington violence

For forward-looking investors, the Democratic Senate sweep, which gives the party control of the White House and Congress, has been the biggest news in recent days. Control of all three branches of government gives the new Biden administration’s agenda an advantage, and that could mean faster and more generous adoption of additional incentives to get the economy back on track.

This news outweighed the shocking images of riots by Trump supporters that stormed the US Capitol building on Wall Street. The Dow Jones climbed past 31,000 points on Wednesday for the first time in history and closed at an all time high.

The optimism on Wall Street comes as no complete surprise. Historically, US stocks have not been affected by civil unrest until the turmoil has a tangible impact on earnings or economic growth.

If the market closed at current levels, the Dow would have recorded its first result above 31,000 points, and the Nasdaq would close above 13,000 points for the first time in history.

But anyone worried that stocks are going up too fast for their own good can catch their breath, said Thomas Mathews, market economist at Capital Economics. “We still don’t think stock prices look too high relative to expected earnings,” Matthews said in a note to clients.

Interest rates remain low for now, which is good news for stocks as it means borrowing is cheap for companies and investors have few other good options.

On top of that, the vaccine rollout and the government’s additional stimulus potential will trigger a strong recovery later in 2021, he said.