Wall Street stocks rally to records on Inauguration Day 2021

On Wednesday, all eyes turned to the inauguration of President-elect Joe Biden, which took place at the West Front of the Capitol just noon before in a scaled-down, socially distant event. A preview of the spending battles that lay ahead emerged on Tuesday during the Senate confirmation hearing for Biden’s nominee for US Treasury Secretary, Janet Yellen. The recovery also started to stall in the final three months of 2020 as surging COVID-19 infections ushered in business-sapping restrictions.

Biden starts off his presidency with a roughly 13% post-Election Day market gain, the best S&P 500 performance between the election and the inauguration for any president going back at least to 1952, according to CFRA. The three major indexes closed at record highs, with the Dow Jones industrial average adding 257 points, or 0.8%, while the S&P 500 climbed 1.4%, and the tech-heavy Nasdaq jumped 2%. The stock market has been surging for months, despite the economic anguish caused by the coronavirus pandemic. The Nasdaq has more than doubled since its pandemic low point back in March.

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Main urban areas in Japan, including Tokyo, are under a state of emergency, with evening dining at restaurants discouraged. Critics say that’s not enough, as deaths related to COVID-19 have been rising. The yield on the 10-year Treasury rose to 1.10% from 1.07% late Tuesday.

The second-best first-term https://1investing.in/ was John F. Kennedy with an 8.8% gain from election to inauguration. It rose 17.0% from his election day and 10.5% from his inauguration to late September 2017. It is only using inauguration dates that Trump’s Dow and Nasdaq returns are ahead of Biden’s by 0.8% and 2.0%, respectively, but Biden’s S&P 500 return has returned 6.7% more than Trump’s. The stock market has not crashed under Biden as Trump predicted as seen in this debate video. After digesting all this, the markets rallied to close higher for the week with the Dow and S&P 500 up 0.6% and 0.5%, respectively, while the Nasdaq was flat. However, these and other issues, such as the continued impact from the Delta coronavirus variant, could lead to more volatility until a large number of companies report September quarter results in the second half of October.

Biden’s policies could accelerate the rotation to cyclical stocks that has already been underway. StockCharts.comTrump’s return of 16.0% since his inauguration is the metric that has the best outperformance vs. Biden at 14.0%. The post-election to late September timeframe saw the Nasdaq with the highest performing Index for Trump, coming in at 23.7%, but was still short of Biden’s 26.5%. Procter & Gamble raised its fiscal 2021 forecast and said revenue last quarter jumped on higher pandemic demand for cleaning products.

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“The huge rally we had suggests the market is looking past the virus, but the degree of the recovery of the economy is not a sure thing yet,” he said. “Everybody expects a rebound in the second half. The question is how strong will it be. If you get a big stimulus package o top of the last stimulus package we got, that rebound could really be much stronger than expected.” The Biden agenda is expected to result in a faster-growing economy, a stronger stock market and higher interest rates in its first year.

Political strategists expect Biden will get his stimulus package but it will be trimmed down. Ed Mills, Washington policy analyst at Raymond James, said the package could be cut to about $1 trillion based on the size previously discussed by House Speaker Nancy Pelosi and outgoing Treasury Secretary Steven Mnuchin. If history holds, Biden’s stock market should continue to do well, since the average first-year gain for Democratic presidents is 11.3%, according to CFRA.

A better-than-expected start to earnings reporting season is also helping to lift the market Wednesday. Analysts came in with low expectations, forecasting the big companies in the S&P 500 will report a fourth straight drop in earnings per share because of the damage from the pandemic. But the vast majority of the earliest reports have managed to top forecasts. The hope on Wall Street is that such stimulus will help carry the economy until later this year, when more widespread COVID-19 vaccinations get daily life closer to normal. Such hopes have helped stocks and Treasury yields rise, even as theworsening pandemicdigs a deeper hole for the economy.

Stimulus and stocks

Of course, stock markets respond to many forces outside a chief executive’s control, and neither Trump nor Biden can take full credit for the stock markets recent rise. Gains for stocks have also been accelerating since Biden’s election, before his inauguration, on enthusiasm about COVID-19 vaccines and hopes that he and Congress can deliver more stimulus for the economy. The bump for stocks between the most recent Election Day and Biden’s inauguration is bigger than Trump’s bump before his inauguration. Stock strategists have said the Biden stimulus proposal accelerates a market rotation that was already beginning, as investors shift into cyclicals from growth names. “We’re leaning more toward cyclicals,” said Wren, but added he still likes technology.

South Korea’s Kospi rose 0.7%, Hong Kong’s Hang Seng gained 1.1% and stocks in Shanghai rose 0.5%. U.S. stocks are rallying to records Wednesday on encouraging earnings reports and continued optimism that new leadership in Washington will mean more support for the struggling economy. The corporate tax rate, currently at 21%, could be moved as high as 28% under Biden’s proposals, but strategists expect it to be held at 25%. There could also be higher capital gains taxes, and the highest individual tax bracket could be raised.

Trump has said in the past that he should get credit for the stock market’s gains following his election but before his inauguration. The market got a “Trump bump” then on anticipation of lower tax rates, less regulation on companies and faster economic growth. Much of that did come to fruition, but the COVID-19 pandemic and the government’s response to it upended everything in 2020. (That’s based on the Dow Jones Industrial Average’s close the day prior to the inauguration through Wednesday’s close.) The S&P 500, meanwhile, is up over 10% since Biden assumed office. The stock market rallied to a record close as President Joe Biden was sworn into office, sparking hopes for another stimulus package and smoother vaccine rollout ahead. A slew of strong quarterly results also boosted sentiment, including from Netflix which soared 16.9%.

“Of course, no one knows where we go from here, but with record monetary and fiscal stimulus, coupled with a huge re-opening later this year, a continuation of this bull market could be in the cards,” LPL’s Detrick wrote in a note Wednesday. What’s more, after Biden’s election, stocks gained 14.3% between Election Day and Inauguration Day, the biggest jump ever, topping that of President Hoover (13.3%) in 1929. Global stocks were mixed Wednesday, with the United Kingdom’s FTSE 100 roughly flat while Japan’s Nikkei 225 ended the day down 0.4% and Hong Kong’s Hang Seng Index climbed 1%. A slew of other bank earnings, from BNY Mellon, Citizens Financial and U.S. Bancorp, were “not bad, but no reason to dive back into the group,” Crisafulli added, noting that BNY and Citizens performed better than expected thanks to lower taxes and reserve releases . Democrats now control both houses of Congress – which ultimately controls the nation’s tax and spending policies – but many Wall Street analysts expect horse-trading with Republicans to chip away at the size and scope of Biden’s proposed stimulus.

Dow futures slightly higher on Biden’s Inauguration Day

As he takes office, he already has big plans for his first few days in the White House. He will rejoin the Paris climate deal, likely scrap permits for the Keystone XL pipeline and introduce new immigration policy. With just hours to go until a new administration, keep a close eye on the stock market and be sure to follow along with Inauguration Day festivities. You can follow events live on Twitter or through live blogs like this one from CNBC.

One is inflation could move higher as demand picks up in a recovering economy or build as the dollar and debt burden grows. Economists, however, see higher inflation as temporary at some time this year and not a problem at this point. “All of these cyclicals stocks have moved in advance of what we think will be a higher rate move. Rates have moved up to support that idea,” Wilson said. “We think they could go up quite a bit more over the course of the next several months.”

With other globalization definition names reporting soon, we could be seeing the start of a pre-earnings rally. More than any other president, Trump pointed to stock markets gains as his own personal success, although he did not seem to consider stock market losses in the same light. Joe Biden, who is being sworn in as the 46th U.S. president Wednesday, has already proposed a $1.9 trillion relief package to help individuals, boost the vaccination effort and provide funds for state and local governments. Policy strategists expect that plan to be significantly pared back before it can get through Congress, but it is expected to be followed up with another in March that would promote job growth and infrastructure spending. StockCharts.comOn the Tuesday of the election between Trump and Biden the Index closed at 28,323. It also increased the next three days with Biden in the lead but it had not been called.

Spiraling coronavirus counts and deaths have more workers applying for unemployment benefits and shoppers feeling less confident. The closely watched 10-year Treasury yield started the year at 0.91%, and was at 1.09% Tuesday afternoon. Strategist do not see it as a problem for the stock market in general unless it starts to move rapidly higher. The stock market is indicated slightly higher Wednesday as investors digest a clutch of quarterly, corporate results and prepare for the inauguration of Joe Biden as the 46th U.S. president. Per LPL, the Dow has returned an average 4.3% under the first 100 days of a new president. And notably Biden’s record tops his predecessor President Donald Trump’s stock performance for the same timeframe (up 6%).

Major Indices Launch Wednesday Higher

Joe Biden’s stimulus plan has boosted the stock market already and is expected to fuel more economic growth, higher interest rates and more stock market gains. The low rates, along with new stimulus and the continued rollout of vaccines, will likely help bolster markets and the recovery. The new president’s plans are not without risk, including inflation and interest rates that start to bite into stock market gains. Trump’s preferred measure is often the Dow Jones Industrial Average, even though the S&P 500 is much more important to most workers’ 401 accounts. Under Trump, the Dow had an a annualized return of 11.8% from his inauguration until his last day in office, according to Ryan Detrick, chief market strategist for LPL Financial. That’s better than any Republican president since Calvin Coolidge during the roaring 1920s, but it’s not as good as the returns for Bill Clinton or Barack Obama.

• Markets overall closed in the green Wednesday, with the S&P 500, Dow, and Nasdaq rising nearly 1.4%, 0.8%, and almost 2% respectively—all hitting record highs.
• The other concern is that the Biden administration would have to raise taxes to pay for its stimulus program.
• Companies will need to meet the market’s expectations — including for a huge rebound in profit growth through 2021 — to validate the big runs for their stock prices during 2020, even as their profits plummeted.

President John F. Kennedy’s 8.8% gain had been the best, followed by President Dwight Eisenhower, with 6.3%, and President Donald Trump, with 6.2%. President-elect Joe Biden moves into the White House in the coming week with the biggest stock market tailwind since a presidential Election Day going back to at least 1952. As of noon, he will officially be president of the United States, and his first few executive orders already promise to make waves. Although experts are already chiming in on how Biden will affect the stock market , he may not be the only leader worth watching.

Still, much of the boost Biden is getting in the markets may be due to the fact that, “The economy continues to recover, COVID continues to get better, and I think that Biden is getting the political benefit of that, at least so far,” suggests Mills. Since his inauguration, President Biden has signed multiple executive orders and a massive $1.9 trillion stimulus bill, and accelerated the pace of the COVID-19 vaccine rollout. Biden has also proposed other big spending packages aimed at infrastructure and social programs like child care and education. “I think we’re all beleaguered. I think an orderly transfer of power, coupled with a well-defined plan to give us vaccines as they roll out, will make it so this market can go up tremendously,” CNBC’s Jim Cramer said on”Squawk Box” Wednesday. “Everything else, I’m not saying it’s irrelevant but you can’t get this economy open until we’ve figured out how to get the vaccines from Pfizer and Moderna into our arms.” “Does Congress want to have a bipartisan show of support after what has been an extraordinarily tenuous beginning of this year, to put it mildly?” Mills said.

He is also expected to immediately put the U.S. back in the Paris climate accord and promote clean energy in his infrastructure plan. Since the start of the year, cyclicals have outperformed, with energy gaining the most, up 15%, helped by higher oil prices. Biden’s policy got a big boost from the outcome of the Jan. 5 Senate runoff elections in Georgia, where two Democratic wins gave him an unexpected thin majority in the Senate. Each party has now 50 seats, and Vice President-elect Kamala Harris will cast any tie-breaking vote.

CFRA’s Sam Stovall points out that “since JFK, the S&P 500 gained an average 3.5% in the first 100 days of a new Democratic administration, rising in price for all five newly-elected presidents except Jimmy Carter,” he wrote in a Wednesday note. The S&P 500’s performance on Wednesday—when it closed up almost 1.4%—was the largest Inauguration Day pop since 1985, when the S&P 500 rose 2.3% on the start of President Ronald Reagan’s second term, according to LPL Financial data. It also handily beat the 0.3% jump experienced by the index during the inauguration of President Donald Trump in 2017. Speaking at a press conference prior to his departure from Washington, DC, Trump touted the strength of the US stock market during his time in office and its comeback from last year’s pandemic lows.

• For the full year, net revenues were a record $48.2 billion, rising more than 16% from the $41.4 billion the bank reported year ago.
• Of course, stock markets respond to many forces outside a chief executive’s control, and neither Trump nor Biden can take full credit for the stock markets recent rise.
• “If you get a much stronger economy in the second half of the year, that could trump the negative effects of tax increases,” he said.
• “What’s more encouraging is the positive guidance companies are projecting. So despite some inevitable bumps in the road, traders and corporate America alike are starting to see the light at the end of the tunnel.”
• The new president is not expected to curb fracking except on federal land.

As investors wait for more news on this front to develop, it is important to note what has already played out. Just last week, the U.S. banned imports of cotton and tomatoes from the region. While the stock market has bounced back from its pandemic lows to achieve new highs, the nation’s economic recovery is widening long-festering racial and income inequalities and leaving millions of Americans behind.