Thereâ€™s a mob in Washington, D.C. preventing Congress from certifying the presidential election results. The Capitol Building has been evacuated, and the prospect of more violence hangs over the city.
The stock market has barely acknowledged the chaos.
Yes, the major indexes are off their highs. The Dow Jones Industrial Average, once up more than 600 points, finished the day up 437.80 points, or 1.4%, at 30,829.40, a record close, while the Russell 2000, which rose 4%, also finished the day at an all-time high. The S&P 500 closed up 0.6%. Only the Nasdaq Composite, off 0.6%, closed down on the day.
Itâ€™s a question that comes up all the time: Why isnâ€™t the market reacting to something that is freaking out so many of us? And the only answer I can give is the market, though responding to the emotions of human beings, doesnâ€™t respond to events that donâ€™t look like they will hit the economy. And this one doesnâ€™t.
Even gold, which should be rallying if investors were worried, canâ€™t find a bid. â€œThe market doing what itâ€™s supposed to do,â€ says Quincy Krosby, chief market strategist at Prudential Financial, noting that the precious metal has fallen 1.7%. â€œThe market is saying it thinks this will be OK.â€
By the end of the day, the market was still acting as if the runoff election in Georgia was the bigger event from a market perspective. The Associated Press named Democrat Raphael Warnock the winner in his race against Republican Kelly Loeffler early in the day, and called the race between Democrat Jon Ossoff and Republican Sen. David Perdue in Ossoffâ€™s favor in late afternoon.
Expectations that Democrats will control the Senate and the House led the Dow to rally, just as it did following Joe Bidenâ€™s election victory, while the Nasdaq is lagging. A Democrat-controlled Congress is more likely to pass a larger stimulus bill, giving the economy a boost.
The market might also be looking back at history, which shows that the Dow has gained an average of nearly 18% when Democrats had control of the presidency, the Senate, and the House of Representatives, according to Bespoke Investment Group data.
That would all change if the situation in Washington escalates. But for now, the market thinks it knows enough to state clearly: This too shall pass.
Write to Ben Levisohn at Ben.Levisohn@barrons.com