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All reporters: Wen Qiao, Lan Suying All editors: Lan Suying
The Xinhua News Agency reported on the 8th that, according to US media estimates on the 7th, the Democratic presidential candidate and former Vice President Biden won more than 270 electoral votes in the 2020 US presidential elections. The Republican presidential candidate and current president Trump later declared that the election is far from over.
Currently, Biden has revised his Twitter certification to: United States was elected president. In the election victory declaration, Biden called for an end to the election campaign and hoped that the American people would forget their differences and unite.
Since Election Day, the US stock market has also performed well. Regarding the potential impact of the policy changes that may occur after the general election on the capital markets, a reporter for “Daily Business News” connected with the chief market economist at Capital Economics, an economic research consulting firm. British, to interpret.
Biden announced his election as president of the United States
On November 3, the United States marked the beginning of Election Day. In the seventh local time, many American media, including CNN, BBC and The Associated Press, declared that Biden won 20 electoral votes in Pennsylvania, with a total of 273 electoral votes, surpassing the electoral threshold of 270..
Biden and his vice-presidential campaign partner Kamala Harris later modified their Twitter certifications to be “President-elect of the United States” and “Vice President-elect of the United States.” At the same time, Biden tweeted: “American people, I am honored that I have been chosen to lead our great country. The work ahead will be hard, but I assure you: I will become one for all.” The president of the Americans, whether you vote for me or not. I will live up to your trust in me. “
In the election victory declaration, Biden called for an end to the election campaign and hoped that the American people would forget their differences and unite. In a televised address on the 6th, Biden said he already had a plan of action in response to the US epidemic, reviving the economy and addressing climate change.
After the media announced the news of Biden’s election, former US Presidents Clinton and Obama, as well as British Prime Minister Johnson, Canadian Prime Minister Trudeau, German Foreign Minister Maas, Mayor from Paris Hidalgo, Irish Prime Minister Martin and dignitaries from other countries sent messages to congratulate Biden. .
In this regard, CCTV News reported that Trump refused to accept, saying that there are states that need to count the votes, and promised to take legal action to guarantee the legality of the results. Trump’s team stated that they will prosecute the related cases in court starting Monday to ensure that electoral law is fully enforced and that legitimate winners are chosen as president. The American people will never give up until they get the honest votes they deserve and the demands of democracy.
Before the results were released, the competition between Biden and Trump was fierce. Trump posted on social media at 6th local time that the relevant legal proceedings have just started. According to Reuters, three people familiar with the matter said on the 6th that Republicans are trying to raise at least $ 60 million to fund Trump’s legal challenge to the results of the US presidential election.
As investors are less concerned about the potential negative consequences of the US election result, since last week, US stocks have closed for 4 consecutive days, with technology stocks leading gains in major sectors. Last week, the three major stock indices posted their biggest weekly gains since April: the Dow Jones was up 6.9% in a week, the S&P 500 was up 7.3% and the Nasdaq was up 9%.
Although the stock market rose significantly last week, the impact of the new corona epidemic and other political uncertainties on the market and the economy remains a widespread concern on Wall Street.
The results of the general elections have a geometric impact on the market
What impact will possible policy changes behind the election result have on the market? What will happen to the next fiscal stimulus policy? The “Daily Business News” reporter (hereafter referred to as NBD) especially engaged Simona Gambarini, chief market economist at Capital Economics, a renowned British economic research and consulting firm, for the analysis.
NBD: Biden and Trump have very different tax policies. Trump previously lowered the corporate tax from 35% to 21%. Biden expects to increase the corporate tax rate to around 28%. How will different trends in fiscal policy affect the monitoring market?
Simona Gambarini: Biden proposes to crack down on companies in the tech, pharmaceutical and biotech industries, because most of their revenue comes from tax havens. However, the tax reform he proposed may not eliminate this practice. Assuming that the effective tax rate for all sectors of the Standard & Poor’s 500 index increases to 28%, this will reduce the index’s earnings by about 12%, but the actual impact may not be that great.
Trump previously lowered the corporate tax rate from 35% to 21%, but most companies in the S&P 500 actually pay a lower tax rate than this. The previous tax system allowed companies to defer the taxation of their foreign affiliates without repatriating their foreign income to the United States. Many companies credit most of their income to affiliates in countries that can avoid tax, such as Ireland and the Netherlands. Under the name. In order to reduce this change in earnings, the United States introduced the Global Low Tax Income (GILTI) tax system for intangible assets, but this has not changed.
Biden’s election is expected to increase the GILTI tax rate to 28%, but the actual corporate tax rate will remain lower than that of the United States, so the transfer of earnings cannot be completely eliminated. Also, if the Democrats fail to win the Senate, this policy will be difficult to implement immediately.
NBD: In terms of energy policy, in addition to supporting tax subsidies on energy, Trump also supports the use of more land for oil exploration. On the other hand, Biden intends to implement a $ 2 trillion climate plan and propose goals such as reducing carbon emissions. What effect does this have on oil demand and prices?
Simona Gambarini: Biden is actively pursuing economic “decarbonization,” which will increase demand for natural gas in the short term, which is beneficial for agricultural producers who produce biofuels.
This short-term policy shift will have no direct impact on US oil supply or demand. But in the long term, it will have a negative impact on the supply, demand and prices of all fossil fuels and biofuels. In particular, if Biden seeks to improve relations with Iran, it will bring downside risks to oil prices. After all, if the United States lifts sanctions, Iran will increase production, which may return the oil market to glut.
In general, in any case, oil demand is expected to fall in the medium term, and international oil prices will show a steady downward trend before 2024.
NBD: Wall Street generally predicts that regardless of who gets elected, the performance of the tech sector may start to weaken. What do you think about this?
Simona Gambarini: The first factor affecting the technology sector is the aforementioned fiscal policy. The second is regulations. Biden will enforce antitrust laws more vigorously than Trump. In addition, the outstanding performance of technology stocks this year is mainly due to the improvement in the income of technology companies due to the measures of home and social isolation adopted under the new corona epidemic. However, in the future, vaccines will be released, the epidemic will be controlled effectively, and performance in the field of science and technology will weaken.
NBD: How does the result of the elections affect the achievement of a new round of stimulus plan?
Simona Gambarini: When Biden is elected, neither he nor the Democratic Party will win an overwhelming victory. Therefore, a large-scale fiscal stimulus package will be impossible. Even if the Senate represents only a small percentage, it will prevent Biden from implementing the ambitious agenda set during the campaign.
NBD: After weighing all these possibilities, what should prudent investors do to avoid risk?
Simona Gambarini: Based on the trend of the past two days, Biden’s victory may cause the dollar to fall. The share price may depend more on who controls the Senate.
Now the chances of reaching a major tax deal appear to be even slimmer: We believe the yield on the 10-year US Treasury will remain below 1%.
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