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As forecasted by many, Biden won the elections, but we could be still away from the official announcement as the Trump campaign filed a series of lawsuits, many of which will be brought Monday. Thus, we can’t discount that final results will be postponed for a longer period. On the other hand, it is important to mention that if Biden’s victory is obvious, then the Supreme Court of the disputed states will not admit a recount. Howbeit, history shows it rarely makes a difference.
Let’s remember Joe Biden’s election program:
1) Raising the corporate income tax rate and imposing a corporate minimum book tax
2) Raise the top ordinary income tax rate from 37% to 39.6%
3) Reverts the top individual income tax rate for taxable incomes above $400,000 from 37 percent under current law to the pre-Tax Cuts and Jobs Act level of 39.6 percent.
4) Improve the Obamaсare health care system
5) Reduce drug costs
6) Soften migration policy
7) Build a Modern, Sustainable Infrastructure and an Equitable Clean Energy Future with a $2 trillion plan
But what if we see Biden’s victory + Senate under the Republicans? Not the worst possible, but at the same time not the best scenario for the stock market. This would mean that the stimulus for the economy planned by Biden will be approved, but the tax increase will not. And this will lead to a larger increase in the US budget deficit.
According to Eamon Javers, the Biden team is being cautious now, but transition planning has been ongoing for months. If he wins, we shouldn’t expect economic team announcements in the first wave of the transition. BlackRock Investment Institute, in turn, expects tech and health-care companies, as well as quality and large-cap stocks, to perform well under a Biden presidency with a divided government. If the U.S. ends up with a divided government it could mean limited fiscal stimulus, capped increases in bond yields, and dampened inflation expectations, while risk assets get a boost.
The second topic to discuss is the Federal Open Markets Committee (FOMC) decision to keep interest rates at 0 to 0.25% during its November 4-5 meeting. This didn’t come as a surprise, but we find it important to highlight that Federal Reserve Chair Jerome Powell has not discounted the possibility of a shift in the central bank’s bond purchases in the coming months. He also mentioned that more fiscal and monetary support is needed as the second wave of Covid-19 infections could slow down economic recovery.
What about Covid-19, is it gone?
Unfortunately, no and more countries are reimposing lockdowns. Of recent, Greece announced a second lockdown, Merkel reached a deal for a one-month partial lockdown in Germany, Belgium tightened restrictions on businesses and social life and a new lockdown is coming into force for England.
In this context, economists began talking about a slowdown in the economic recovery. Despite the fact that new measures should be less damaging, at least because manufacturing and construction companies will stay open, they will still be quite painful for the economy. Such fears could not but drive oil prices to a five-month low. It is also worth mentioning that supertanker freight rates are on the rise for a second time as producers, refiners, and traders scramble to secure ships to transport crude or store it.
Finally, the Brexit negotiations remained stuck, but parties seem to be moving towards a compromise. To be more precise, Von der Leyen tweeted that “some progress has been made, but large differences remain” with just over a week remaining before the UK and EU parliaments need to begin ratification of a trade and security deal.
