While the stock market is not the economy, its overall performance is nevertheless widely viewed as an indicator of general feelings about and confidence in the nation’s economy as a whole.
And if its performance just before the election is any indication, Wall Street’s prediction of a Biden victory on Election Day shows investors are feeling good about that prospect, as CNN reported.
The day before the election saw the markets rally after dipping over the last week of October.
CNN reported that the Dow Jones Industrial Average was up 450 points by midday Monday, while the S&P Index gained 1.4% and the Nasdaq Composite rose by 0.6%, gains that experts attributed to Wall Street expecting a Biden win, coupled with Democrats retaking control of the Senate and maintaining control of the House.
“Not only are markets betting on Biden for now — they seem to favor a significant Democrat win,” Nigel Green, a financial advisor and founder and head of deVere Group, told DW .
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Experts have pointed to two factors in particular driving the stock market’s and Wall Street’s confidence in Biden and the Democratic Party.
The first is the prospect of increased economic stimulus spending.
“We have been emphasizing that the Senate outcome is important for the trajectory of fiscal policy,” Citi economist Andrew Hollenhorst wrote in a note to clients, CNN reported. “Under any election scenario we expect a $1.5 trillion plus fiscal package, possibly as early as just post-election.”
Without further stimulus, consumer spending is expected to plummet as millions of Americans still need government benefits to make ends meet due to the ongoing COVID-19 pandemic, according to CNN.
The second factor is simply clarity.
While the nation decides who to pick to lead it, uncertainty has led to more volatile markets. Craig Fehr, an investment strategist at Edward Jones, told Fox Business that just the clarity of the election finally being over will help the markets, whether Biden proves victorious or not.
“We think this demonstrates that once election uncertainties are replaced by a clearer policy outlook (regardless of which political party will be setting those policies), the market typically refocuses back on the fundamentals of economic and earnings growth – both of which we think will be positive next year,” Fehr told Fox Business .
But even over the long-term, investors seem to favor Biden for clarity.
Chris Myers, chairman of the financial advisory firm Signum Global Advisors, told DW that investors needs stability and security now. “People are just exhausted,” he told NPR radio, according to DW. “It’s hard to make medium to long-term capital allocation decisions because you never know what [Trump’s] White House is going to do.”
DW noted that sectors that would benefit from a Biden presidency have seen increases of late, including renewable energy and building materials.
Trump advisor Larry Kudlow, himself a Wall Street veteran as a former Bear Stearns exec, suggested that the financial community might regret their support of Biden, however.
“For some reason, they don’t think Mr. Biden is going to move far left,” Kudlow said at an Axios event, according to Politico . “I think he will. Just look at the people around him.” Kudlow also said that Wall Street execs would have “many, many regrets” regarding a Biden presidency.
However, speaking with DW, Green suggested that investors would accept higher taxes and increased regulations to gain long-term stability and clarity.
h/t: CNN , Fox Business , DW
