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At United States vote counting is still ongoing and, given the risks of litigation, a final result could arrive in several days or even weeks.
Joe biden he has a slight advantage in some key states, is catching up in others, and appears to be very close to reaching the 270 voters needed to become president.
However, I republicans they still hope to win in the key states and the team Triumph has already filed a number of lawsuits. What to expect from the reaction of the markets?
US markets in uncertainty
So far, this uncertainty about the prolonged and unclear outcome of the elections has not had a negative impact on markets. By contrast, after last week’s correction, equity markets rallied around the world, supported by decreasing interest rates.
At the moment we are still in a normal, albeit difficult, phase of the market and no breakdowns are occurring. However, in the case of a controversial outcome and a protracted dispute, the persistence of uncertainty could have a negative impact on risk asset class and cause a market correction. Most importantly, the longer the uncertainty lasts, the greater the likelihood of a negative market reaction.
Until last week, the forecasts gave a clear victory to the Democrats, but now the market is positioned for a presidency Biden with a divided Congress. What does this mean for the markets?
Because the markets bet on Biden and Congress divided
Historically, theAmerican equity it performed better with a Democratic president and a divided Congress, with an average annual return of 13.4%.
With Biden as president, we will have a new fiscal stimulus, even if more content than expected in a democratic “blue wave” situation. This will favor United States Treasury Bonds and it would lead to a drop in interest rates, which in turn is positive for equity markets.
In addition, we expect tax incentives for US companies and an infrastructure program to support industrial companies, which should lead to a reduction in spreads.
Still, we find it difficult to reverse the Biden administration tax cuts of the Trump administration or introduce new taxes, for example on technology companies, and this is a good sign for the stock market and the Nasdaq.
Another important factor may be the less controversial approach internationally, which would offer less support for a strong dollar. Finally, Biden may be less aggressive towards international partners and the China.
In the case of a Trump presidencyEven with a divided Congress, the effects on the markets are likely to be similar. With more business support, but also greater unpredictability in international relations.
* Andrea Siviero, Investment Strategist at Ethenea Independent Investors and former Director of International Monetary Cooperation at the Swiss National Bank.
