U.S. safe-haven risks shift one year after riots

An explosion caused by a police munition is seen while supporters of U.S. President Donald Trump riot in front of the U.S. Capitol Building in Washington, U.S., January 6, 2021. REUTERS/Leah Millis/File Photo

WASHINGTON, Jan 6 (Reuters Breakingviews) – A lot has changed in the U.S. economy one year after protesters stormed the Capitol building. As the election of U.S. President Joe Biden was being validated by Congress, the global pandemic was still raging with a vaccine in the nascent stages, and the American economy was on shaky ground. Now, with business booming, the risks are shifting. While divisions that spurred violence remain, the U.S. dollar is even stronger, helping it keep its grip on its safe-haven status.

In a speech marking the one-year anniversary, Biden on Thursday blamed his predecessor, Donald Trump, and said democracy was under threat. The former reality TV star has repeatedly claimed the 2020 presidential elections were rigged, spurring supporters to try to stop lawmakers from certifying results.

Trump’s claims have been rejected by several U.S. courts and election officials. And in the past year, the U.S. economy has blown past where it was on that violent day. The reopening of businesses and pent-up demand created a tight labor market, with 0.7 unemployed persons per each job opening in November. The U.S. dollar, relative to a basket of other major foreign currencies, has risen more than 7% while the S&P 500 Index is up by about 23%.

The threats facing companies now are disconnected from politics. Supply-chain bottlenecks have roiled business and their customers, spurring the highest pace of inflation in 40 years. The consumer price index rose 6.8% in November year-over-year. On Thursday, Treasury yields rapidly gained after the U.S. Federal Reserve released minutes of its December meeting showing central bankers expect hiking interest rates at a faster pace.

Political risks remain. About one in three Americans said they believe violence against the government is justified in certain circumstances, according to a recent Washington Post-University of Maryland poll. Around 55% of Republican voters still believe Trump’s claim about the fraudulent election, per a Reuters/Ipsos poll. Those sentiments could make future elections even more chaotic, including the 2024 presidential race.

Still, America has had a remarkably fast recovery given the pandemic. U.S. GDP exceeded pre-Covid levels in the third quarter of 2021, compared to the other six countries of the G7 that were still below, according to the Organisation for Economic Co-operation and Development. High consumer sentiment, even in the face of rising inflation, still makes the dollar a good bet.

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CONTEXT NEWS

– U.S. President Joe Biden on Jan. 6 blamed his predecessor, Donald Trump, for riots a year earlier at the Capitol building related to the last presidential election. In a speech marking the one-year anniversary, Biden said democracy is at risk and questioned whether partisan election officials would be able to overturn legal votes.

– Thousands of Trump supporters stormed the Capitol building on the day when Congress was set to vote on certifying the results of the 2020 presidential election, which Trump claims was marred by fraud. His assertion has been rejected by several U.S. courts and state election officials.

Editing by Lauren Silva Laughlin, Sharon Lam and Amanda Gomez