After days on tenterhooks, investors now have clarity about the next occupant of the White House and will start planning for the presidency of Joe Biden.
On Saturday, Biden was projected the winner by the Associated Press. The 77-year-old Democrat beat Trump in Pennsylvania and other key states, propelling him to victory over incumbent President Donald Trump.
The projections for victory for the former vice president come amid the heavy toll of the COVID-19 pandemic that had framed much of the race.
Here’s what the changing political landscape means for investors across Wall Street.
Regardless of the victory in the 2020 elections, analysts said a declared winner and thus less election uncertainty paves the way for even higher U.S. stock prices, even with the President Trump’s campaign, as recently as Saturday morning, stating his intent to challenge the election results in several battleground states.
Also, many investors had penciled in a Biden presidency but a Republican Senate as the most likely outcome well before the November election, and thus had plenty of time to game out the eventual implications.
“This is a known outcome. Risk assets likes certainty,” said Scott Kimball, portfolio manager at BMO Global Asset Management, in an interview before the AP CNN, NBC and Fox News called the presidential race in favor of Biden on Saturday morning.
“A divided Congress, from a policy perspective, takes extremes out of either direction,” the BMO money manager added, taking the more ambitious measures from Republican or Democrats policy agendas out of the equation.
The big story now could be how stocks with rapid earnings growth perform against shares of more economically sensitive companies.
Biden may have trouble pushing for stronger regulatory and antitrust action against some of the highflying technology companies, such as Google parent Alphabet
which now faces an antitrust lawsuit and Facebook
which is threatened by Congress calling section 230 of the Communications Decency Act into question, endangering the platform’s protection from liability as a publisher or content provider.
As investors pare their expectations for the size of another financial-aid package by Congress to boost the economic recovery from the coronavirus pandemic, U.S. Treasury yields may fall increasing the value of the future earnings of growth stocks, Esty Dwek, head of global macro strategy for Natixis Investment Managers, told MarketWatch.
With Biden likely to run into opposition from Senate Republicans, less ambitious fiscal policy is expected. In that scenario, bonds will continue to rally as debtholders have less to fear from the higher inflation expectations that would follow from a faster economic recovery and increased debt issuance.
Stock markets may be rejoicing at the prospects for a divided government…