Most of Wall Street had been wanting Democrats to win the White House
The scene: Most of Wall Street had been wanting Democrats to win the White House and pick up chairs in the Senate, paving the path for large incentives to help the US economy recover from the pestilence.
Votes are still being counted, but the chance of Democrats seizing control of the Senate has declined. Even so, markets have found a new description. Societe Generale strategist Kit Juckes understood the thinking in a note to consumers on Friday: “A Democrat President who doesn’t control the Senate will be tiny aggressive on business but will be more insufficient where fiscal policy is worried. This leaves a larger role for the Federal Reserve, which means even lower rates for longer [and] even more QE for longer.”
Ground line: Markets are wagering that corporate and personal taxes won’t be going up next year, and the central bank will keep interest rates low for even longer than previously expected, helping to boost stocks.
Investors are also prepared for more coronavirus relief after Senate Majority Leader Mitch McConnell said Thursday that he conducted to pass a stimulus package before the end of the year, differing with pre-election comments that a deal should wait until 2021.
“A package completed by the end of the year would exceed investor goals and greatly lessen near-term economic risks,” UBS analysts said in a report on Friday.
While that batch will likely be a lot smaller than the $2 trillion plan praised by Democrats, markets are drawing comfort from the fact that the US economy has been expanding for the past several months.
While workout has picked up in major economies following historic compressions in the second quarter, the recovery is slowing and there are still major risks to the outlook.
A rise in coronavirus infections has prompted governments across Europe to implement the second round of sweeping constraints, which are anticipated to tip the region’s economy back into a slump in the fourth quarter.
The pandemic is anticipated to effect lasting injury to the labor markets the Bank of England said in a statement Thursday as it declared openly even more stimulus.
In the United States, where coronavirus case numbers are surging at a startling rate, the comeback is also running out of steam. Some 6,38,000 jobs were added in October, but the country is still down 10 million since before the pandemic started up.
National Reserve Chair Jerome Powell warned at a press meeting on Thursday that the outlook for the economy is “extraordinarily risky and will depend in large part on the achievement of actions to keep the virus in check.”
While there may be limited social permission for indiscriminate lockdown agreements in the United States, the rise in infections will at the very least keep a lid on business and consumer confidence, examining the economy.
Fourth-quarter US GDP is near to tipping back into negative territory “than is comfortable,” said Colas of DataTrek Research. “Markets are okay with that for now, but further shortcoming could change their tune.”