Week One and 2021 is Already a Mess
Posted January 05, 2021
Stocks took a beating yesterday.
The S&P 500 broke down to test the lower line of its uptrend (blue lines). I’ve drawn the key lines of support that stocks NEED to hold in green in the chart below. If we take out those lines, then something is VERY wrong in the financial system.
There is certainly no shortage of reasons for the volatility. In the next week we have:
- The U.S. Congress moving to ratify the 2020 presidential election tomorrow. This process is currently in total chaos as many members want to contest the outcome
- Major Trump rallies in Washington DC (today and tomorrow). Who knows how these will play out and whether they might change how members of Congress choose to vote for the official ratification of the 2020 presidential election’s winner.
- The Georgia runoff Senate races (today). If the GOP wins these two seats it means Congress is split with the Democrats controlling the House and the GOP controlling the Senate. If the Democrats win these seats, it means the Senate is split 50/50 between the two parties with Vice President Kamala Harris casting the deciding votes (51/50 for the Democrats).
- Things are heating up in Iran where leaders issued direct threats to President Trump over the weekend. While the threats obviously wouldn’t mean an actual assassination attempt on the president, they do indicate that the situation in the Middle East is worsening and could lead to more conflict.
All in all, things are a mess…
The U.S. political situation in particular is murky as, by law, until President Trump concedes or Congress ratifies Joe Biden as the winner of the election, there is no real president elect.
The minutiae of the situation in Congress regarding the presidential vote is outside of my area of expertise, but there is at least one example in which a president was not decided until literally three days before Inauguration Day (January 17). That occurred when several states contested their election results and sent multiple slates of electors. Subsequently, a special election commission was set up to decide the election outcome.
Will this happen again today and tomorrow? Will President Trump finally concede? Will the GOP or the Democrats win the Georgia Senate runoff? Who knows. It’s a total crapshoot and anyone who argues otherwise isn’t being honest.
With all of this in mind, I’d recommend the sidelines for this week. Let this mess clear up and then make a move.
Editor, Money & Crisis