It is now really all over for President Trump as Congress confirmed Joe Biden as the next President of the United States.
The last 24 hours have been unprecedented in so many ways. We saw massive chaos at Capitol Hill; Trumpâ€™s Twitter account was suspended. Global markets are looking at the U.S. politics through a different lens. All of this has dented the U.S. reputation on the world stage and adversely influenced the mighty dollar. However, one particular factor that didnâ€™t change is the U.S. stock market rally.Â
The Dow Jones Industrial Average logged another record high yesterday and rallied over 400 points. There is no doubt that the primary reason for the stock market rally is because of optimism among stock traders and investors about a further stimulus aid package from lawmakers. It will be the first time in 10 years that Democrats are set to control the House, the Senate, and the White House.
Stock traders believe that passing any stimulus package will be a lot easier for Democrats as they will have a majority in the Senate with Vice President-elect Kamala Harrisâ€™ vote. Remember, Democrats wanted to have a massive stimulus; they were talking about over $3 trillion of the stimulus aid package to kickstart economic recovery in the U.S. However, the second fiscal package was only $900 billion, and the fact is that economic conditions are deteriorating once again in the U.S., and they are deteriorating fast.
The fresh evidence of this came in the form of the U.S. ADP data, which was released yesterday. It confirmed that the U.S. labor market had taken a U-turn once again, and more Americans are off the payrolls again. The U.S. ADP numbers are usually taken as a clue for the mother of all economic data, the U.S. nonfarm payroll data, which is due tomorrow. One important factor to notice is that the stock market didnâ€™t pay much attention to the U.S. ADP number yesterday because of the chaos at Capitol Hill. However, tomorrowâ€™s economic number isnâ€™t going to be ignored by market players because of its enormous importance.
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The Dow Jones industrial average has seen a massive rally due to fiscal and monetary policy support. There is no denying that if the Fed had not moved this fast, economic conditions would have been very different in the U.S. yesterday. The Fed Minutes acknowledged that economic recovery has slowed. Some Fed members saw the potential need for future adjustments to asset purchases, which confirms the Fedâ€™s commitment to keeping interest rates unchanged for the foreseeable future. So, monetary policy support isnâ€™t going to change anytime soon. A weak U.S. nonfarm payroll number will only strengthen their dovish view.
The bottom line is that the biggest uncertainty over the U.S. election is very much over now. Traders are positioned for more supportive fiscal and monetary policies, and this is pushing the stock market rally.