As we had been speculating for the past 5 weeks the US presidential election has broken all kinds of precedencies.
- This will be the longest time need to declare a winner since 2000 when George W Bush and Al Gore fought it out for a recount in Florida. That election was declared on December 12 and this one could go just as long to be officially called.
- The Senate is also on a knife edge with Georgia having to have 2 runoffs in January. The Blue Wave scenario could still be a possibility here as both parties hold 49 Senate seats each, but the consensus is the Republicans will hold it.
- Bookies and pollsters have been wrong again but will probably be proved ‘right’ in the end. That’s not to say the fluctuations between the ‘favourite’ Biden to Trump to Biden throughout Wednesday’s trading day should be seen for anything but a serious mispricing event, the fallout on FX market was telling seen here.
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All indications are that President Trump will fight tooth and nail with legal challenges and recount petitions and that the election may take weeks to be officially called. But on the maths of the electoral colleague votes needed he can’t cross the divide and Vice President Biden will be the 46th President of the United States.
Going forward there are several factors now to consider:
- Sweet spot? Some on Wall street are pointing out that we in a ‘sweet spot’ market speaking with a Light Blue finish. The reasoning for this is Senate Majority Leader Mitch McConnell has signalled his willingness to pass the next COVID bill which is the stimulus the US needs. But the strong thinking is the Republicans will block tax and regulative reform Biden and Harris ran on over the coming 4 years. This probably explains the surge seen in Big Tech and why equities in general log their best week since April.
- 68 million Americans. It also needs to be acknowledged by the new administration that a record amount of people voted for the Republican Party through Trump. Their biggest ‘reason’ for voting this way was ‘the economy’. Trump did oversee the best economic scenario in the US for over 50 years before COVID. Biden will need to work hard to keep the economy going for those that want a strong economy or you could see a break back to the Republican candidate of 2024. The Rust Belt states that broke this time around will reverse if this plays out. The conclusion here is a US market positive if Biden chases this narrative.