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Election results: what’s next?
Information is not investment advice
This weekend the truth has been revealed. After the intense vote counting last week, we get to know the next President of the United States – Joe Biden. What are his promises and what to expect from the markets next month? Let’s see how the land lies before making any premature actions.
Planned policy changes
1. Covid-19
That’s not a secret that traders will be closely watching how Mr. Biden will deal with the current coronavirus crisis. The cases are still surging across the country and pharmaceutical companies are still working on the vaccines. After the Republicans’ refusal to increase a fiscal stimulus, Joe Biden’s administration plans to implement a totally different approach. As a result, the markets should be prepared for a larger stimulus. Not as large as $2 or $3 trillion, though, as the Senate may still likely remain under the control of the Republicans, but still bigger than the initially offered one.
This fact is bullish for the stock market.
2. Taxes
Joe Biden’s promise to increase taxes on corporations may have a direct impact on the components of S&P500. According to Goldman Sachs, the hike of corporate taxes may reduce the earnings of the S&P500 index from $188 per share to $171. After that, a decline of the major American index will be inevitable.
However, without a Democratic Senate, there is a little chance that this policy change will pass through. Investors understand that and expect the stock market at new highs.
If the Senate is controlled by the Republican Party, this fact is neutral for the stock market.
3. Tech regulation
To be fair, this is the policy the two parties find some kind of consensus. The US President Donald Trump was conducting antitrust policies against Google and Facebook, claiming them in unfair actions, Joe Biden will look at the tech giants from a different point of view. His administration will focus mostly on antitrust and privacy regulation. This news may drag some of the biggest stocks down in the mid-term.
This fact is bearish for the stock market.
4. Trade regulation
After the aggressive trade policy conducted by Donald Trump towards China, markets hope that the President-elect Joe Biden will take a more flexible approach to confront Beijing.
This fact is bullish for risky assets.
Ekaterina Gorbatenko
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