| Biden victory certified, Democrat sweep confirmed, and claims data due. Recognized President Donald Trump's challenges to the result of November's elections finally ended in the early hours of this morning after Congress formally recognized Joe Biden as the next U.S. president. While the certification of his victory was expected to be delayed by challenges from Republican lawmakers, in the end the delay came after the Capitol was stormed by a mob of Trump supporters, forcing lawmakers to flee to safety. The president has seen many of his closest supporters and aides abandon him in the wake of the violent scenes in Washington. ControlWhile the almost unbelievable events unfolded at the certification of Joe Biden, it was confirmed that Jon Ossoff had defeated incumbent Senator David Perdue in Georgia, meaning Democrats will control the Senate for the next two years with Kamala Harris the deciding vote in the chamber which will be split 50:50. In the near term, a new stimulus package is now likely with aid to state and local governments and more stimulus checks to individuals. ClaimsThere will be another check on the state of the U.S. labor market at 8:30 a.m. when weekly jobless claims are published, with 800,000 filings for benefits expected, a small increase from last week. Yesterday's ADP private employment number showed a surprise drop in positions for December, the first decline since April. Economist are split on whether tomorrow's payrolls number will be positive or negative as the economy remains under pressure from the pandemic. Markets rise Global equity investors have mostly looked past the violence in Washington yesterday as they concentrate on the likelihood of more economic stimulus. Overnight, the MSCI Asia Pacific Index climbed 0.8% while Japan's Topix index closed 1.7% higher. In Europe, the Stoxx 600 Index had gained 0.3% by 5:50 a.m., led by construction stocks, miners and energy firms. S&P 500 futures pointed to a higher open, the 10-year Treasury yield was at 1.044%, oil held its gains and gold slipped. Coming up...As well as claims data, the U.S. November trade balance is published at 8:30 a.m. December ISM services is at 10:00 a.m. Regional Fed presidents Patrick Harker, Thomas Barkin, James Bullard, Charles Evans and Mary Daly all speak at various events later. Bed Bath & Beyond Inc., Walgreens Boots Alliance Inc. and Constellation Brands Inc. all report results. What we've been readingThis is what's caught our eye over the last 24 hours. And finally, here's what Joe's interested in this morningPundits and politicians like to seize on the national debt as some kind of measure of underlying economic frailty. But this focus is arguably exactly backwards. It's private sector balance sheets that have in recent decades been the key source of vulnerability. On a recent episode of the Odd Lots podcast, Tracy Alloway and I had the pleasure of speaking with Jan Hatzius, Goldman's top economist. Hatzius is rare on Wall Street in that he uses a sectoral balances framework for analyzing the economy. The basic gist is that the economy can be broken down into three sectors: The government, businesses and households, and the foreign sector. At any time, their respective deficits and surpluses must net out to zero. So for example, in the late 90s, at the tail end of the dotcom boom, the U.S. government was actually running a fiscal surplus, but the private sector was running a deficit -- spending more than it was saving. This private sector deficit presaged the bust in the early 2000s.  Private balance sheets got extremely stretched again during the housing boom, leading up to the Great Financial Crisis, and the brutally slow recovery that followed. The recovery from that debt overhang caused in part by collapsing home values -- caused some to characterize the situation as a Balance Sheet Recession. Fast forward to today, and the situation is very different than the aftermath of the housing crash. For one thing, household balance sheets were in good shape going into the Covid crisis. Furthermore, asset values have generally gone up, not down in the past year. Beyond that, the government has spent money to a historic degree already, plying the private sector with nominal income to counteract the slump. And then finally, opportunities to spend have been extremely limited due to the virus, causing private sector savings to pile up. So you can see how the yellow line above shows a massive surplus, representing the strong aggregate position of the private sector. Hatzius is optimistic about the economy in 2021 and beyond due to these dynamics. And while the 2020 recovery has been faster than expected, the strength of private-sector balance sheets may be a big reason why.
With stocks sitting near all-time highs, the market may be anticipating a Balance Sheet Recovery, with huge savings and low debt loads providing a tailwind for some time to come. Definitely check out the full interview with Hatzius here or on iTunes here. In addition to the above, we talked inflation, the Fed, MMT and plenty more.
Joe Weisenthal is an editor at Bloomberg. Like Bloomberg's Five Things? Subscribe for unlimited access to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. | 
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