At the time of writing Joe Biden looks set to become the next President of the United States as the race now centres on a few key states which have not yet reported. It seems the likely result is a Biden victory but one in which the Democrats do not have the level of control in the Senate they would need to pass many of the policies they wish to. Meanwhile, Trump has launched a series of legal actions baselessly suggesting that the ongoing counting of votes is illegitimate in a number of states.
After weeks of mounting pressure, UK Prime Minister Boris Johnson announced on Saturday that England would enter a second national lockdown which began yesterday in the hopes of saving Christmas. UK Chancellor Rishi Sunak announced yesterday that the furlough scheme will be extended across the UK until the end of March. The scheme will pay up to 80% of a person’s wage up to £2,500 a month.
Markets have responded favourably to the dispersion of uncertainty surrounding the election this week. Given the likely result of a Biden victory albeit with limited power in the Senate, the next President is unlikely to be operating from a position of strength. As the nuance explains, this is perhaps the most market-friendly result and global stocks have reacted accordingly this week as evidenced by the sea of green in the 1 Week chart below.
As it stands, Joe Biden is likely to close the gap and win the US election. However, with the Republican party performing better than expected in the Senate, Biden will do so without the majority necessary for the Democrats to achieve the unencumbered mandate they would have needed to implement many of their policies. This is actually good news for markets.
Biden’s plans to raise taxes, strengthen the regulation of US tech firms, and fiddle with the healthcare system were a potential threat markets had priced in prior to this week’s outcome. With these threats subsiding, technology and healthcare stocks have rallied this week. Trump’s failure to achieve re-election brings the likely respite from US-China trade tensions, another positive for markets.
As the political landscape in Washington heads towards stability, the much debated US stimulus bill is likely to materialise in the coming months. One thing that the Democrats and Republicans can agree on is that some sort of fiscal injection will be necessary to ail the US economy. The passing of this bill, strongly supported by the monetary powers of the US Federal Reserve, is likely to provide further confidence to investors.
With broad-based confidence in markets this week, many of our holdings have benefited from the rally. With markets up, the prospects across the asset classes are largely unchanged; the only difference being that investors have gained some clarity on what the next four years holds for the US.
Quote of the week
“I’m walking a dog here, I’m not doing anything illegal.” Unamed man from the Czech Republic
As much of Europe returns to lockdown, its populous is once again having to get used to further restrictions on social freedom. One man in the Czech Republic went to rather odd lengths in order to flounce the nation’s social distancing measures. A news crew accompanying patrolling police officers in South Bohemia captured footage of the officers stopping a man caught walking in a public area after the 9pm curfew time. The man’s defence was that he was out walking his dog, which is a valid reason to be out after curfew. It didn’t take much complicated police work on behalf of the officers to identify that the object at the end of his lead was a stuffed toy dog on wheels. A+ for effort.
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