Stocks soar as Wall Street looks past Washington violence

For forward-looking investors, the Democratic sweep in the Senate, which gives the party control of the White House and Congress, was the most important news of the past few days. Control of all three branches of government gives the incoming Biden administration’s agenda an advantage, and it could mean swifter and more generous passing of additional stimulus to get the economy back on track.

That news outweighed the shocking images of rioting Trump supporters storming the US Capitol building on Wall Street. The Dow on Wednesday climbed past 31,000 points for the first time in history and closed at an all-time high.

The optimism on Wall Street isn’t a total surprise. Historically, US stocks have been unmoved by civil unrest as long as the turmoil has no tangible impact on earnings or economic growth.

If the market were to close at current levels, the Dow would log its first finish above 31,000 points, and the Nasdaq would close above 13,000 points for the first time in history.

But anyone worried stocks might be rising too fast for their own good can take a breath, said Thomas Mathews, market economist at Capital Economics. “We still don’t think equity 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 because it means borrowing is cheap for companies and investors have few other compelling options.

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