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Why does the stock market love the prospect of a divided government



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  • Stocks are gaining their strongest price in months despite the ongoing US presidential race.
  • Tbecause the most important election results have appeared.
  • The Republican-controlled Senate, which appears to be imminent, could also prevent a rise in taxes and regulations sought by Democrats.
  • Senate Majority Leader Mitch McConnell said on Wednesday he aims to pass a smaller stimulus bill before the New Year.
  • Visit the Business Insider home page for more news.

For stock investors, the most important US election results came true.

Wall Street banks and poll participants are largely expecting a green wave on Election Day. A Democratic-controlled government will adopt massive financial stimulus early next year and spur the nation̵

7;s economic recovery.

But that did not happen, with Republicans gaining some important Senate seats. Although some races are too early to call, it is unlikely that Democrats will withdraw from Congress they hope.

Instead of lamenting the death of a preloaded stimulus deal, investors quickly went on and found new reasons for the price hike. Merchants have prepared a Democratic-controlled government to raise corporate taxes and regulate key industries, policies that will likely cut corporate earnings. If Republicans maintain control of the Senate, they are ready to block such efforts.

It is also “hard to imagine” that Senate Majority Leader Mitch McConnell will reverse the Trump administration’s tax cuts, said Ralph Schlosstein, the co-executive director of Evercore. A drop in rates boosted the company’s bottom line and helped drive the longest-run bull market ever.

Read more: 3 veteran investors share where to invest now to build a long-term, enduring portfolio and win even if elections result in a government deadlock

That newly discovered optimism helped fuel the S&P 500’s biggest one-day gain since June on Wednesday, as healthcare and tech giants skyrocketed as the regulatory specter led by Democrats fading. The rally extends into Thursday, with similar growth targets pushing key indexes higher.

The imminent legislative stalemate in the 117th National Assembly not only helps those who fear higher taxes and stricter regulation. McConnell opened another bailout package on Wednesday, saying new aid should be approved by the end of the year. He also hinted that he would provide additional aid to state and local governments, a partisan sticking point that hinders pre-election negotiations.

“The hope that the partisan passions that prevented us from implementing another bailout package will diminish with the election,” he said.

With new daily coronavirus infections hitting record highs and slowing economic recovery, negotiations are likely to be more urgent. A short-term deal will at least appease some of those hoping the green wave will provide fresh stimulus.

Read more: Warren Buffett’s Berkshire Hathaway has moved from being extremely cautious to a series of transactions over the past six months. We asked a bunch of experts to analyze its displacement strategy

Whether investors hope Biden will hold the lead or fall behind Trump during the lengthy counting of votes, they can rest assured that “one of the most controversial policy initiatives of one. The two sides are undisputed for at least two years, “Steven Ricchiuto, director of the US Economist at Mizuho, ​​said on Wednesday.

Mark Haefele, Chief Investment Officer at UBS, said: “At least for the medium-term outlook of the market,“ the picture doesn’t really change ”. “It’s rare that an election is so important to what the market is doing in the global economy.”

Now read more about the markets from Markets Insider and Business Insider:

An advisor to the world’s largest asset management firm explains why Biden’s win and divisional convention is the best long-term outcome for the market – and says investors should consider These 4 sub-sectors to achieve continuous profitability

General Motors jumped 7% after third-quarter earnings doubled analyst expectations

US weekly jobless claims hit 751,000, beating economists’ forecasts as labor market recovery slows


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