A “lawless mob” storms the US Capitol in a bid to overturn a democratic election, says Michael Mackenzie in the Financial Times. How did “cold-blooded markets” react? After a “brief wobble” they decided to set new all-time highs. Investors are more interested in Georgia, where Democrats last week gained control of the US Senate. That should give the Joe Biden administration more scope for further stimulus measures, helping the current “reflation” stock rally run hotter.
The expectation of new stimulus measures has continued to push up yields on ten-year treasury bonds – the benchmark of America’s borrowing costs – which this week hit a ten-month high. Signs that the US economy began to lag at the end of last year have given the stimulus doves another boost. The country shed a net 140,000 jobs in December, the first decline in seven months. The fall was driven by layoffs in the hospitality sector, which has been hit hard by the country’s post-Thanksgiving virus wave.
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Markets are used to economic data, but they are a poor judge of a society’s democratic health, says Greg Ip in The Wall Street Journal. Venezuelan markets rallied for years as Hugo Chavez consolidated power. Only when inflation surged and the economy crashed did they realised how many key social institutions had been destroyed. Deep polarisation is emerging as a long-term threat to US economic vitality. Investors should pay attention.
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