Stocks rise as Wall Street looks past Washington’s violence

For forward-thinking investors, the Democratic battle in the Senate, which gives the party control of the White House and Congress, has been the main news for the past few days. Control over all three branches of government gives the incoming agenda of the Biden administration an advantage, and it can mean faster and broader additional stimulus to get the economy back on track.

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

The optimism on Wall Street is not a total surprise. Historically, U.S. equities have been moved by civil unrest, as long as the unrest has no tangible impact on earnings or economic growth.

Should the market close at current levels, the Dow will close its first finish above 31,000 points, and the Nasdaq will close above 13,000 points for the first time in history.

But anyone worried that stocks could rise too fast for their own good can breathe a sigh of relief, says Thomas Mathews, market economist at Capital Economics. “We still do not think stock prices seem too high compared to expected earnings,” Matthews said in a note to clients.

Interest rates remain low for the time being, which is good news for equities, as it means loans are cheap for companies and investors have few other compelling options.

In addition, the vaccination of the vaccine and the possible additional government stimulus later in 2021 will cause a strong recovery, he said.