Dow 30,000: In Case The Next Stop Is Down

Image via Bloomberg Business Week

Dow Hits 30,000

In our post-election update last week, we offered our take on why the market had shrugged off the contested election:

In hindsight, the market reaction since the election is understandable. Of course, news of successful vaccines against COVID-19 by Pfizer (PFE) and BioNTech (BNTX) and Moderna (MRNA) buoyed stocks. But also, Biden and Trump are basically corporate-friendly. There are significant differences between Biden and Trump on other areas, such as immigration and foreign policy, but Corporate America would thrive under either. President Trump may be a populist, but the first major legislation he signed included a cut in the corporate income tax rate. Joe Biden may have been endorsed by the socialist Senator Bernie Sanders, but as Jacobin Magazine lamented this week, Biden has no plans of offering him a cabinet spot.

The market got more comforting news this week. Although President Trump continues to contest the election(and got a judge to block the certification of the vote in Pennsylvania on Wednesday), he authorized the General Services Administration to cooperate with Biden's transition team. 

Also, as the New York Times reported (to the chagrin of progressive Matt Stoller) Joe Biden would appoint former Fed Chairwoman Janet Yellen as Treasury Secretary. 

Why Dow 30,000 Now?

That's a question Wayne Duggan at Benzinga raised on Tuesday. His answer, in part, was that "investors appear to be pricing in another aggressive round of government stimulus in the near term". But according to the New York Times, Senate Majority Leader McConnell is offering a stimulus package about a quarter the size of the one the Trump administration offered before the election. 

Duggan also cited the development of the vaccines as a boost for the market. Despite the vaccines though, New York and California are implementing new lockdowns. So it's possible investors have been overly enthusiastic about the near-term. 

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