In spite of the expectations of former President Trump’s supporters, Wall Street did not go into a panic after Joe Biden was elected President of the United States. Quite the contrary. The New York Stock Exchange celebrated with historic gains on the day of President Biden’s inauguration.
The S&P 500 rose by 1.39%, reaching a record close of 3,851.85. This was 14 percent higher than on Election Day. Interestingly, this broke the previous record for an inauguration day climb previously set on the day on which Hebert Hoover assumed the presidency in 1929. On that day it rose a total of 13.3% since the day of President Hoover’s election.
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The Dow Jones Industrial Average closed higher by 0.89%, or 257.86 points, closing at a new record high of 31,188.38.
The Nasdaq Composite closed higher by 1.97%, at 13,457.25.
The Russell 2000 closed higher by 0.44%.
The major indexes also rose on Tuesday, the day before President Biden was inaugurated, but not by as much.
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) shares gained 5%. Netflix (NASDAQ:NFLX) had a 17 percent gain on news that it had more than 200 million subscribers worldwide at the end of 2020. The world’s first streaming service also revealed that it would no longer need to borrow billions of dollars in order to finance its TV shows and movies.
“This is the best inauguration day return since Reagan’s second-term,” Ryan Detrick, Chief Market Strategist for LPL Financial, told the New York Post. “Of course, no one knows where we go from here, but with record monetary and fiscal stimulus, coupled with a huge re-opening later this year, a continuation of this bull market could be in the cards.”
So what is the cause behind all of these gains and optimism on Wall Street?
First of all the new $1.9 Trillion stimulus package. This plan is intended to help get America moving again after the Coronavirus recession of 2020. Because of it investment firm Goldman Sachs has forecast a 6.6% growth in the U.S. economy for 2021. In 2019, the last year before the devastation caused by the Coronavirus, America only saw 2.3% growth.
The Biden stimulus is $1 billion more than the package offered in December. It grants $800 more in cash per person than the $600 previously offered. And the new Biden administration wants to raise the federal minimum wage to $15 an hour. And Goldman Sachs said that Joe Biden’s plan to offer Americans $1,400 stimulus checks will cause a “large spike” in their disposable income.
More money spent means more businesses making money and paying more in taxes. It also means that people in the services industries will be able to get back to work. They will then be earning money again and have more to spend themselves.
So not only will the government no longer need to spend so much on unemployment, getting the economy going again will lead to an upward spiral where spending feeds growth which feeds spending, etc.