The Dow, S&P 500, and NASDAQ Composite index soared in trading again Thursday as investors welcomed the possibility of a new era of fiscal stimulus from a Democratic controlled Senate, House, and Executive Branch of the U.S. government.
Despite the chaos in Washington on Wednesday including a mob’s assault on the Capitol Building, markets have been moving higher in expectation of government spending.
With a Democrat-leaning Senate (given Vice President-elect Kamala Harris’s deciding vote) there is an expectation for massive spending in the way of additional coronavirus relief bills, possible basic income measures, as well as health care and education bill measures.
This spending out of Washington, D.C., coupled with low interest rates and expected additional liquidity measures out of the Federal Reserve, will likely help stimulate some inflationary pressures in the markets in the near-term.
The question remains: will these measures result in real, meaningful economic growth? At some point, the real economy will need to catch up. Otherwise, America risks spending money it doesn’t have and there could be significant consequences when the bill comes due.
I discuss in the third chapter of today’s podcast. The markets love the idea of stimulus… for now, anyway. Please download and subscribe to listen to my show here: