Wall Street is supposed to hate uncertainty but as the presidential war continues, investors couldn’t be happier.
If possible, Joe Biden would win, he would become the first president since George HW Bush took office without control of both the House and Senate – a result showing at least two years of closing legislative rules.
It’s a scenario that Wall Street seems to love very much. One thing could give Senate Republicans little incentive to enact a new, larger coronavirus stimulus package Democrats had hoped for and the power to halt tax hikes, Big spending scheme and tougher regulations.
Stocks rebounded on Thursday, for the first time since 1982, the Dow and S&P 500 gained at least 1% for four consecutive sessions, giving stock indices the biggest weekly gains since April, with the Dow Jones up 7.1% for the week, the S&P 500 and the Nasdaq up 7.4% and 9% for the week to now.
Oliver Jones, senior market economist at Capital Economics, told the Guardian: “There is certainly some relief that things like tougher tax policies, tougher corporate reforms are unlikely to be. table if the Democrats control more than Congress.
“It basically looks like a continuation of the status quo, which is a result most companies favor,” Jones added.
Brad McMillan, chief investment officer at Commonwealth Financial Network, said that some of the gains were due to the smooth election and despite the legal challenges, the likelihood of the outcome.
Going forward, McMillan told the Guardian, markets were encouraged by the prospect that the Biden administration’s more progressive, high spending proposals would be less likely to overtake the divided legislature on the main side. treatment.
“Biden’s economic plan includes new corporate taxes and capital gains taxes, all of which can disrupt the market,” said McMillan. “The risks from the Green Wave and the Green New Deal are now unquestionable.”
Wharton’s finance professor Jeremy Siegel welcomed the results as well, even if the final outcome of the presidential election remains unresolved. “Honestly, that combination is great for the economy and it’s great for the market,” Siegel told CNBC Wednesday.
Market enthusiasm for a divided government has historical roots decades ago. In 2018, after voters gave control of the lower house to Democrats in the midterm elections, the market soared.
Financial advisor Mellody Hobson noted: “The better performing phases are the ones where the houses are divided in terms of leadership.”
Since Tuesday, markets have also been excited by the prospect of government spending on infrastructure that could also pump billions of dollars in taxpayers’ dollars into overhaul of its energy and transport systems. nation.
For major tech companies, which are facing antitrust investigations under the Trump administration, the political scenario could also be quite optimistic. Before the election, FAANG shares (Facebook, Apple, Amazon, Netflix and Google), in particular, showed restlessness after months of dramatic increases in the pandemic.
“The street appears to have received ‘Goldilocks election results’ for tech stocks with no ‘green wave’ (the Senate remains red) and the Biden White House,” said Dan Ives of Wedbush Securities. Likely on the horizon, “Wedbush Securities’ Dan Ives said in an investor note on Thursday.
“With the Republicans having the ability to control the Senate, the opportunity for a major legislative change to antitrust law is undeniable in the eyes of investors, which poses a risk,” Ives added. the biggest tech companies are solid with spillover impact in the sector.
Ives said the election result is likely a “green light to buy technology stocks” and predicts that major technology stocks could rise 10% to 15% by the end of the year. “We remain optimistic about owning secular growth stories for 2021,” he wrote.