A lot was said and written in the media in the last few hours about yesterday’s events, with observers talking about a risk for democracy or calling the situation an attempted “coup”. At least at this stage, we consider that the facts are not that alarming, and we would not use such dramatic words.
First of all, yesterday’s events had nothing to do with a revolution. The demonstration was not massive, and only a few hundred Trump supporters broke into the Capitol buildings. As far as we know, they caused material damages but the four reported deaths are indirect casualties, and very few of the demonstrators were truly aggressive with people. Many were more interested in taking “selfies” than rewriting the US Constitution into a dictature. The facts came as a shock because they are not that usual in such a place and all the media were already there to cover the Congress meeting, but similar things happened in many other countries (including France during the “yellow vests” episodes) in the last few years.
The other point we would like to stress is, we find on the contrary that Democracy worked well under those circumstances. Many current or former Republican politicians stated clearly that they disapproved what was going on, and publicly called Donald Trump to concede to his rival. Approximately half of the twelve Senators who were planning to request an inquiry into election results in the most disputed states appear to have dropped the case and validated those results last night.
Of course, our views may change in the next few days and, as we wrote in the monthly comment, many things might happen before the new President’s inauguration. However, at this stage, the main problem in the USA is the spirit and behaviors that, these events show, were prevailing in the close circle of the man who has been the President of the world’s most powerful country for four years. This problem is not new, and we were already taking it into account in our strategy in the last few years. We thus do not see any reason to change our stance just because it is becoming more visible… just at a time when it is becoming irrelevant.
Having said that, we are far from considering the market’s reactions to the Jan. 6 vote in Georgia as logical. Of course, this vote will help Joe Biden implement his program, including his plan to swiftly introduce more stimulus measures. However, we are not sure that the consequences the market drew for individual sectors or stocks (some of which moved 5-10 percentage points either way) are all realistic. Time will tell, and our investment horizon is beyond that anyway.
HG – Jan. 7, 2021