The #CapitolRiots of last week will transcend our time and will likely be referred to as the “Electoral Rebellion of 2021.” Think Whiskey Rebellion, where President Washington had to send troops into a state to quell a revolt.

In this case, we had President Trump sending supporters in D.C. to change/protest an election on Capitol Hills. Thirty years from now, it will be difficult for historians to explain and for students to understand how a hostile mob was able to breach Congress when it was well known they would be coming. While some may attempt to dismiss this event as overblown by the media, the fact is our nation’s capital was overrun quite easily by demonstrators wanting to change the outcome of a peaceful election and disrupt the business of the nation.

Moreover, it disrupts the message of our country to the world. Lincoln’s Gettysburg Address comes to mind, take a moment to reread it. Our nation has been a beacon of hope to every nation struggling to achieve a sustainable representative government, to every nation attempting to throw off a dictator, to every nation striving to achieve what we have had for over two hundred years, freedom.

This is what was at stake on 1/6/2021.

For the economy and the markets, here are 5 takeaways from last week.

  1. Markets remain firmly focused on the healthcare crisis and the cure. The US rollout of the vaccines has been poor, but there are bright spots like West Virginia. Unlike the spring, the broader point is that there is a cure, and we can expect a larger population to be inoculated by June. This should mean continued economic expansion after Q2. Most economists are now calling for a surge of jobs in the 2nd half of 2021 after the vaccinations are fully ramped up and vaccine hesitancy is overcome.
  2. However, the current economy and job market continues to be depressed by the virus with leisure & hospitality plus transportation negatively impacted the most. Any F2F business is struggling. The BLS unemployment numbers for December showed a drop of 140k, but this was driven by a drop of 500k in leisure & hospitality jobs. These were lost due to renewed state shutdowns over surges in the virus.
  3. GA Democratic victory should signal another round of stimulus with $2k checks and a total stimulus near $700 billion.  This comes on top of the late December stimulus of $900 billion with checks of $600 going out to individuals. The likelihood of new spending has been noticed by the bond markets and US 10 Tsy yields have risen 15bps since the election.
  4. GA also signals the ability of Democrats to unwind major portions of the TCJA, reverse provide a bailout to large blue states ($200B), raise the corporate tax rate (from 21% to 25-28%) and create a carbon tax all under budget reconciliation.
  5. The 50/50 US Senate split also signals an unstable legislative period as any one senator, like Sen. Joe Manchin, from either party can tip the scales for SCOTUS, judges and tax & spending legislation.

Wrapping last week up, extraordinary doesn’t appropriately describe the tumult. Yet, the peaceful transfer of power will occur on 1/20/21, the markets remain well supported and the economy will continue to recover into 2021.