Wall Street Confronts an Uncertain Election Outcome: Live Updates
On Election Day, stocks surged as traders and investors anticipated a “blue wave” with Joseph R. Biden Jr. defeating President Trump and the Democrats gaining both houses of Congress. Stocks rose and U.S. Treasuries fell as traders ditched the traditionally safe asset.
Early Wednesday morning, markets flipped.
Stock futures fluctuated substantially as the reality set in that it could take days to get a clear result, while Mr. Trump tried to claim victory before all the votes were counted. But analysts were also watching Senate races, which no longer clearly indicated a Democratic majority. At 5:30 a.m. Eastern, Democrats and Republicans each had 47 seats.
See the full Senate results here, and updates on the tight North Carolina race here.
Here’s what analysts had to say:
“The optimism about a blue wave was premature”
There is confusion about what exactly Mr. Tump meant when he said votes should stop being counted, said Jane Foley, a strategist at Rabobank. But “there is some certainty,” she said. “The optimism about a blue wave was premature.”
“For the market, there is both good and bad news associated with the idea that Biden won’t have the blue wave through Congress,” Ms. Foley said. “On the one hand, there is disappointment that there isn’t going to be an end to this bickering between the House and the Senate in the near term,” which diminishes hopes of a large stimulus package. But on the other hand, it will be harder for Democrats to increase taxes.
The markets await a stimulus plan
“We expect market volatility to remain elevated until the result becomes clear,” Karen Ward, a strategist at J.P. Morgan Asset Management, wrote in a note to clients. “When it comes, the outcome will be primarily interpreted through the lens of the prospects for further fiscal stimulus. Politics are important, but other factors, most notably progress toward a medical solution for Covid-19, will also be key.”
U.S. growth expectations are lowered
“Markets, which had begun to factor in a Democrat sweep and a significant stimulus bill, are now reining in their growth expectations,” Keith Wade, an economist at Schroders, a London-based asset manager, wrote in a note to clients. “Estimates had suggested this could have been worth an extra 1 percentage point of growth in the U.S. next year.”
Investors can wait for an outcome, but not for too long
“My feeling is the market is probably willing to tolerate this through the end of the week,” said Eric Lascelles, chief economist at RBC Global Asset Management. “If it’s a matter of some legal wrangling beyond that — with only a limited prospect of truly changing the outcome — I think the market can live with that.”
The Federal Reserve will have to do more
“There is no result yet, and the chances of the ‘blue sweep’ expected by markets, is much smaller now,” Kit Juckes, a strategist at Société Générale, wrote in a note to clients. “That definitely means short-term uncertainty, until we get a result. It probably means less fiscal easing than would otherwise have been the case, and continued dependence on the Fed to prop up the economy, for longer.”
A flight to safe assets like government bonds is expected
“It could take even longer to know who won key congressional races, which so far suggest the Democrats and Republicans may be heading for a tied Senate,” Mona Mahajan, a strategist at Allianz Global Investors, wrote in a note. “Generally speaking, markets have performed best under divided government — when one party has only partial control of the House, Senate and presidency, although in this environment enacting a swift stimulus response would be a key priority. Until the final outcome is known, we expect some flight-to-safety response, which will likely favor perceived safe havens, such as government bonds, the U.S. dollar and gold.”
Article source: https://www.nytimes.com/live/2020/11/04/business/us-economy-coronavirus