- The stock market largely welcomes the prospect of a Biden and divided government, but some angles perform better while others continue to be sluggish.
- Fading rates of tax hikes and new regulations have helped technology, finance and healthcare stocks skyrocket in a turbulent week.
- But those who bet on energy stocks or the US dollar missed the market’s gains.
- Visit the Business Insider home page for more news.
The stock market quickly warmed to the prospect of a Biden presidency last week. And as with any major event, some sectors have won out while others have faced new challenges.
President-elect Joe Biden emerged as potentially a winner on Friday morning after updated vote count results in Pennsylvania and Georgia showed he surpassed President Donald Trump in key battlefields. Though Trump has yet to accept defeat, Decision Desk HQ called the race in Biden̵7;s favor on Friday and administration officials have hinted that a peaceful transfer of power will take place.
The stock market, on the other hand, began preparing for that outcome on Wednesday, skyrocketing in anticipation of a divided government. While Biden’s presidency could yield more peaceful trade relations and the potential for higher economic stimulus, a Senate likely still controlled by the Republicans could prevent tax hikes. and stricter regulations.
The shares slowed down to market to close the week following successive post-election rallies. Strategists are now stepping back and assessing how elections of the week will affect risky markets and the economy in the coming years.
Here are the winners and losers of election week.
Read more: ‘It will be very, very bad’: Legendary investor Jim Rogers says the US debt burden is creating the primary environment for the downfall – and warns the next wave of the market will be even worse. 50% decline in the Financial Crisis.
Maybe the biggest stock market winners are technology stocks, if only in terms of the money they lose.
The sector led gains across the market on Wednesday and Thursday as investors viewed Congress potentially divided as a safeguard against antitrust regulation. The S&P 500 tech index rallied 10% throughout the week, broadening the bullish story and reinforcing the tech giants’ rising valuations.
Financial and healthcare stocks also rose similarly as the specter of intense government oversight faded. The S&P 500 Health Care Index rose more than 8% this week as investors bet that a divided government would not be able to pass progressive health insurance reform.
A corresponding index of financial shares returned about 6% in the hope that Senate Republicans could block the increase in corporate taxes.
Read more: From turning a McDonald’s burger to a self-made millionaire: How Willie Mandrell leveraged a simple real estate investment strategy to get 40 apartments and achieve financial freedom
In state elections, cannabis was the clear winner. New Jersey, Montana, South Dakota and Arizona all legalize recreational use of cannabis, rapidly expanding the addressable market to rapidly growing producers. Stockpiles of the drug continued to rise in the week after Biden’s victory, as Democrats said they plan to nominally remove the drug at the federal level.
While such a policy may take longer to implement, it represents a bright future for the young industry.
Aurora Cannabis was up 201% on the week, while peers including Tilray, Aphria and Canopy Growth also rose. The Horizons Cannabis Life Science Index exchange-traded fund, which tracks a basket of pot stocks, rose 36%.
Vehicle-sharing giants Lyft and Uber also soared after Tuesday’s election results. Both firms have struggled to pass Prop 22 in California, allowing contract economy firms to continue to classify their workers as independent contractors and avoid providing the associated benefits. with full employment. Uber has soared 36% for the week, nearly hitting a record high. Lyft has increased to 41%.
Read more: Jefferies said buying 13 stocks that are set to break expectations and recover from their earnings – including top pick can go up 79%.
While the broader market escalated as election results arrived, energy stocks traded sideways and lagged significantly. The Republican-controlled Senate is likely to block the most progressive green energy policies supported by President Biden. Although fossil fuel stocks initially rallied Wednesday, they soon erased the gains.
After rising almost 4% on Tuesday, the S&P 500 energy index fell and closed the week just below the opening.
Meanwhile, the US dollar fell to its lowest level since March when investors returned to the Federal Reserve to spur the nation’s economic recovery. Democrats and Republicans remain separate from their respective stimulus proposals, essentially causing the country to recover without financial support since August. The economy will be less likely to recover quickly and inflation is expected to be pushed further in the future. The Fed has indicated that it will not raise interest rates until inflation tends to stabilize above 2%. So as long as a near zero rate is not applied, the value of the dollar will weaken.
In addition, the Fed may need to relax further monetary conditions in order to sustain recovery. Such efforts can add cash to the financial system and further dilute the value of the dollar. To be sure, a weaker dollar will lower the cost of imports, and President Trump has repeatedly called for a weaker dollar to improve the country’s competitiveness in trade.
Read more: 3 veteran investors share where to invest now to build a long-term portfolio capable of winning even if elections produce a deadlocked government
Finally, economic data releases that often drive markets are largely ignored as election news dominates the media landscape throughout the week. Stocks soared on Wednesday despite ADP employment reports showing a major slowdown in recruitment throughout October.
And when the Bureau of Labor Statistics ‘s monthly nonfarm payrolls exceeded economists’ estimates, stocks were still down during Friday trading. Those looking for a position according to labor market data released throughout the week have certainly missed the market’s upturn and fell prey to its slump.
Now read more about the market from Markets Insider and Business Insider:
Raymond James’s chief investment officer details why Joe Biden and Mitch McConnell are the perfect couple to drive the market up – and lists 4 areas he deems profitable regardless of who is in power.
Peloton rose 6% as quarterly sales tripled out of delivery problems, prompting a series of inventory upgrades
US economy exceeded forecast, adding 638,000 jobs in October as the unemployment rate dropped to 6.9%.