The market is very happy with the results of the presidential election today. Why? It’s all about taxes. It looks like the Republicans will hold the Senate. If that’s the case, the corporate taxes stay low and that’s good for stocks.
Of course, it also makes a new stimulus package less likely, which is bad for the average person.
It was a wild night, but the shift from red to blue was predictable. I noted this in the Newport Beach Chamber’s 2021 Business Outlook Session (even thought I doubted it last night for sure.)
In the next few weeks, we are likely to have a very… interesting presidential election. The winner likely won’t be known for days. This is because half of people plan to vote by mail and many states do not allow for mail in ballots to even be opened before election.
Just to give you an idea of the chaos that is in store, according to data on fivethirtyeight.com
46% of people plan to vote in person
Trump is leading this group 58% to 39%
54% will send in ballots
Biden is leading this group 67% to 31%
So you can see what will happen. By the end of Nov 3rd, Trump will have a huge lead. The question is can Biden catch up.
How will this affect financial markets? Well, let’s go back to November 7th 2000. Bush and Gore went decided for weeks and was fought in courts.
Here’s the S&P 500 returns around election day.
Returns around Nov 7th, 2000.
The markets rallied into the election and then immediately crashed after.
This event, unlike that one, is expected to be chaotic so I’m not sure chaos will generate the same reaction. However, it’s likely not to be well received by the markets.
