Why the stock market loves the possibility of a divided government

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  • Stocks are rising the most in months despite the US presidential race Is still in the air.
  • TCome because the most important electoral result has already appeared.
  • The Republican-controlled Senate could block the tax increases and regulations that Democrats seek.
  • Senate Majority Leader Mitch McConnell said on Wednesday that he aims to pass a smaller stimulus bill before the new year.
  • Visit Business Insider’s homepage for more stories.

For equity investors, the most important results of the US election have already been achieved.

Wall Street banks and polls alike forecast a blue wave on Election Day. A Democratic-dominated government is likely to pass massive fiscal stimulus early next year to revitalize the country’s economic recovery.

But this did not happen, with the Republicans winning several major seats in the Senate. Although it is too early to call some races, the Democrats are unlikely to sweep the Congress they were hoping for.

Rather than regret the passing of a major stimulus package, investors found new reasons to be optimistic. Merchants were preparing for a Democratic-controlled government to raise corporate taxes and regulate key industries, policies likely to reduce corporate profits. If Republicans maintain control of the Senate, they are prepared to block such efforts.

it’s also “Difficult to imagineRalph Schlossstein, co-CEO of Evercore, said Wednesday: “Senate Majority Leader Mitch McConnell will reverse the Trump administration’s tax cuts, lower rates boosted corporate profits and help fuel the longest bull market ever.

Read more: 3 Veteran Investors Share Where To Invest Now To Build Flexible, Long-Term Portfolios That Wins Even If Elections Result in a Deadlocked Government

This helped our newly discovered optimism Feeding the largest single-day gain of the S&P 500 since June On Wednesday, when the healthcare and tech giants rose as the specter of Democratic-led regulation faded. the gathering It extended to Thursday, With the same growth preferences pushing major indices higher.

The legislative deadlock set to appear in the 117th Congress will not only help those who fear higher taxes and tighter regulation. McConnell on Wednesday opened the door to another relief package, saying new aid should pass before the end of the year. He also hinted that he would support additional aid for state and local governments, a sticking point between the parties that hampered the talks before the elections.

“We hope that the partisan feelings that prevented us from carrying out another rescue package will subside with the elections,” he said.

With daily new coronavirus cases reaching record levels and the pace of economic recovery slowing, negotiations are likely to be more urgent. A near term deal should at least satisfy some of those hoping that the blue wave will trigger new stimulus.

Read more: Warren Buffett’s Berkshire Hathaway has turned from extreme caution into a flurry of deals in 6 months. We asked a group of experts to analyze its changing strategy

Whether investors hope that Joe Biden will take the lead or fall behind President Donald Trump in the drawn-out vote counting process, they can rest assured that “the more controversial political initiatives of either side have not been on the table for at least two years,” says Stephen. Ricciuto, Mizuho’s chief US economist, said Wednesday.

“The picture hasn’t really changed,” said Mark Hefel, chief investment officer at UBS, on Wednesday, at least in terms of the market’s medium-term outlook. “It’s rare for an election to be so important in and of itself to what markets do in the global economy.”

Now read more market coverage from Markets Insider and Business Insider:

An advisor to the world’s largest wealth manager explains why Biden’s victory and the split of Congress is the best long-term outcome for the markets – and says that investors should look to these four sub-sectors for sustained gains.

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