Stock Market

The Dow and S&P ended 2020 at record highs at the close of the year.

The Nasdaq is also hovering near highs.

Additional economic measures were approved at year-end in a rush, and the year's tasks were largely completed.

There is a tendency for the market to be supported by a strong Federal Reserve despite slightly higher interest rates, and a situation where easing expectations spread if indicators deteriorate.

Attention at the start of the year will likely be on the Georgia Senate runoff elections held on January 5 US time and January 6 Japan time.

If the Democrats led by Biden win both seats, the Senate will be 50-50 with Vice President Harris casting the tie-breaking vote, creating a blue wave that would make it easier to pass bills in both houses.

Georgia has long been controlled by Republicans, and although the presidential election result was disappointing, Republicans are expected to perform well in the Senate races; the outcome is likely to be a close race and the result will take a little longer to determine.

There could be speculative price movements, so headlines from the election campaign should be watched.

What will happen to broad market indices?

If a blue wave occurs, we should consider two scenarios: continued divided government or a unified Democratic control.

First, while the chart strength exists, in the near term movement, regardless of which scenario, the uptrend does not seem likely to break.

This is a fundamental precondition.

Looking at this year's chart, the key support level is just below 25,000 as a red horizontal line, and as long as it does not fall below, the ascent continues.

In the course of the year, if you place your back here, U.S. stocks hitting new highs would be easier to sustain.

First, consider the case where the Senate is controlled by the Republicans and the divided Congress continues.

This is consistent with how markets priced in after the presidential election, and the trend and price movement are unlikely to change much.

After selling off, the flow would gradually rise in anticipation of near-term Fed easing at the start of the year.

If a blue wave occurs, the situation becomes a little more complex, and at present, with a Democratic administration certain to implement large-scale fiscal stimulus in response to the COVID-19 pandemic, overall stock prices would tend to rise.

However, on a company-by-company basis, the dynamics would change a bit.

Nasdaq and other leaders of the market could face higher regulatory restrictions on tech, limiting upside, but large-scale infrastructure investment is also expected, so Dow and S&P could rise, making an overall upward tilt with some asset allocation, preventing a full broad rally.

Also, looking further ahead to post-COVID times, Biden’s administration, which promised substantial tax increases, would begin to have fiscal stimulus in early 2021, benefiting the market in the near term but gradually turning negative as the COVID situation resolves.

However, for this year alone, it is unlikely that tax increases will be pursued amid the ongoing pandemic, so policy shifts need to be closely watched, but when thinking about 2021, a relatively optimistic view is likely to prevail.

Naturally, prices won’t move solely on this one factor, but in the pandemic era, the rise may be protected, which is a rather ironic situation.

From the latest chart, this is how I analyze it.

1.4 Grand New Year Opening

Stock Market