Market Climbs as Votes Are Counted in US
Nearly 24 hours have passed since the final polls closed in yesterday's federal election and the big question is still: "Who will be the President of the United States?"
Despite polling indicating the possibility of a Biden landslide, early results in Florida put that idea to bed. Ultimately, the race will be decided by some tight races in Arizona, the upper Midwest, and Pennsylvania. At time of writing, it appears that Biden is likely to win in Arizona, Michigan, Nevada, and Wisconsin, and thereby secure at least 270 electoral college votes.
We're not here to break down moment-to-moment updates in the US presidential election, you can turn your television to any channel for that, but to explain why the market has reacted so positively to these developments.
VIDEO: Why is the Market Up, When the Election is Still in Limbo?
No Landslide Means No Tax Increases or Dramatic Changes
We broke down the possible election day scenarios a few weeks ago, and many are still on the table. Either Donald Trump or Joe Biden could still eke out a narrow victory, pending the results of counts (and recounts) in those key states.
The one scenario that is now pretty confidently off the table is the Democratic landslide "Blue Wave" in which Joe Biden wins the presidency and the Democrats seize control of the Senate while maintaining control of the House. This would give them free reign to enact Joe Biden policy points like corporate and personal tax increases, which would have a severely deleterious effect on corporate profitability. Today, we think the market is responding to two things:
Things haven't gone absolutely bananas in the presidential election, at least not yet;
The "Blue Wave" hasn't really materialized.
There are some other isolated situations. Uber and Lyft were up dramatically on the passage Proposition 22 in the State of California, which clarifies that its drivers are in fact independent contractors and not employees. Facebook is up because nobody's blaming a wonky result on their platform (as was the case in 2016) and a split government isn't likely to break up the social media behemoth. Pharmaceutical companies are up because a split government isn't likely to lower their prices or otherwise meddle with their profitability.
As the story continues to unfold, we will bring you more updates. Until then, we expect markets to continue being volatile to both the up- and downsides.
If you'd like to talk about these events or discuss your portfolio, don't hesitate to reach out to us at 604.643.0101.
Cash Management Group
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