The Joseph Group

Georgia (and Washington, DC) on Everybody’s Mind

January 8, 2021

To Inform: 

The events this week in Washington DC were tragic regardless of what side of the political aisle you are on. We pray for our country and we pray for healing.

We now know the election results – Congress has certified Joe Biden’s election as President and in a surprise based on where polls and prediction data were up until a few days ago, Democrats won both Georgia Senate seats. The Senate is now split 50/50 between Republicans and Democrats with incoming Vice President Kamala Harris casting tie breaking votes.

Many prognosticators expected a market decline if Democrats captured the Senate as the “blue ripple” of Democrats controlling the Presidency and both houses of Congress increase the likelihood of further spending and tax increases. However, markets have had a different plan. On the day the Georgia Senate results were announced, the Dow rose over 400 points and is up over 200 as I type this WealthNotes. So, what have we learned from the last few days when it comes to what might be in store for markets in 2021? Here are a few key observations:

  • The stock market is not the economy or the political arena. Markets frequently move differently from the economy and this week has illustrated markets are often independent from politics as well. Few likely would have expected markets to rally in the face of political chaos, yet that’s what happened in recent days. We may have our views on politics, but our job at The Joseph Group is to focus on markets and seek to achieve the long-term goals of our objective-based portfolio strategies on behalf of our clients.
  • Stocks may have gone up, but so have interest rates. We often like to use the analogy of a teeter-totter with interest rates at one end and bond prices on the other because bond prices move in the opposite direction of interest rates. This week, the benchmark 10-year Treasury note hit an interest rate of 1.07% which is a sharp move up from where it ended the year at 0.92%. So far in 2021, through January 6, the Barclays Aggregate Bond Index (representing the other end of the teeter totter) is down -0.76%. We’re seeing future inflation implied by the market tick up with interest rates which could be a sign the market is pricing in potential impacts from more stimulus and increased government spending.
  • Stock market leadership is coming from different areas. Most of the stock market recovery in 2020 was led by big technology stocks which benefitted from people staying at home and working remotely. Market leadership in recent days is coming from areas such as regional banks, energy companies, and small cap stocks. The chart below illustrates an example – after lagging the S&P 500 for much of the last 3 years, banks have outperformed in the index in recent weeks. It’s interesting to us that sectors such as financials and energy aren’t necessarily what you would think of as “market leadership” under a Democrat-controlled government, but nonetheless, that’s what’s happening.

Source: Strategas Research Partners as of 1/6/2021


The market doesn’t necessarily care about what people believe “should” happen and we’re seeing that so far in 2021. In the midst of New Year’s resolutions and predictions, this time of year we love the quote from market guru Steve Leuthold that “predictions are for show; portfolio changes are for dough.” In fact, we’ve borrowed Steve’s quote as the title for our next Portfolios at Your Place event on January 19th at 4pm where we will talk about how are positioning the objective-based portfolios we manage on behalf of clients and changes we are making in those portfolios as we start 2021. We invite you to join us!




This article was written by Travis Upton, Partner, CEO and Chief Investment Officer