Blue wave, chaos in Washington, and frightening ADP data

The Blue Wave (Democrats take control over of the White House, Congress and Senate), widely anticipated in November but initially failed, appears to become real yesterday. The results of the Senate elections from Georgia showed that control of this last bastion of the Republicans is shifting to the Democrats, as with a 50-50 vote, the decisive vote passes to the US Vice President.

What does this mean for financial markets? There is no consensus. The most popular version is an increase in stimulus for the US economy. It seems to be a powerful positive signal for the stock market (especially if we recall 2020), but on the other hand, the issue of inflation may become extremely relevant with the subsequent reaction of the Fed in the form of tightening monetary policy. The rise in the US rate can become the needle that inevitably pierces bubbles in the US stock market.

Another threat of the "blue wave" for the US stock market may become the corporate tax increase promised by Biden. This means that buyback programs already cut in 2020 will be under the pressure, or even the opposite processes might start - lacking cash, companies will sell their previously bought back shares.

Yesterday was marked by chaos in Washington. The generally routine procedure for approving the results of the electoral votes at a joint meeting of the Senate and the House of Representatives was interrupted by a crowd of Trump supporters, which took the Capitol Hill by storm and broke into the building of Congress. The meeting was interrupted, the congressmen were evacuated, the Washington authorities announced a lockdown. In general, Trump decided to leave as loudly as possible. As a result there have been discussions among some Cabinet members and Trump allies about invoking the 25th Amendment, which would allow a majority of the Cabinet to declare Trump unable to perform his duties and remove him.

This week has been extremely successful for the oil market. Following the surprise from Saudi Arabia (a promise to reduce production by 1 million barrels per day for two months) and the OPEC + decision not to increase production in February, the official data on US oil stocks showed a sharp decline (by 8 million barrels). which was the fourth consecutive decline in US oil stocks.
But new pandemic records in the world, as well as in the United States and Great Britain, which automatically means at least a delay in the pace of economic recovery, and in the worst-case scenario a move into a second recession, we still have no any will to buy oil from current prices.

Moreover, yesterday's figures on employment in the US from ADP not only came out much worse than forecasted, but also went into the negative zone (-123K against the forecast of + 88K). Markets are waiting for the official statistics on the US labor market (will be published tomorrow) and looks like they have to prepare for the worst (negative values in the NFP data).