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Uncertainty is the enemy of the markets. Investors expect a decisive winner to emerge, sooner rather than later. Fundamentally, that would mean avoiding the nightmare scenario of a contested election.
In short, election results pointing to a clear winner should boost futures, although several key races were still too early to be announced just after 10pm ET.
It was not immediately clear what was driving the nightly rally.
The Dow closed up 555 points, or 2.1%, more, its best percentage gain since mid-July. The S&P 500 closed 1.8% higher, its best day in a month. The Nasdaq Composite finished 1.9% higher, its best performance since mid-October.
Expect more government spending to aid economic recovery in short-term driven markets and riskier investments like stocks. The gains also reflected Wall Street’s bet that former Vice President Joe Biden will win the election.
A Trump victory would likely mean less fiscal stimulus and therefore a slower economic recovery, according to Kristina Hooper, Invesco’s chief global strategist.
“That environment could still be supportive for stocks given massive monetary stimulus, but it would likely favor secular and defensive growth, and the tech sector is the model for secular growth,” Hooper told CNN Business.
Investors concerned about the possibility of additional stimulus are also closely watching the results in the race for control of the United States Senate. If Democrats appear willing to retake control of the Senate, that could pave the way for strong fiscal stimulus and infrastructure spending, two things markets are yearning for. However, it could also lead to higher taxes that would reduce corporate profits.
– CNN’s Matt Egan and Anneken Tappe contributed to this report..
