The president-elect of the United States, Donald Trump, has declared war on Joe Biden, the market and the foundations of the American electoral system. This would be a summary of the analysts' reactions to the Republican's words, which in his election night speech has confirmed what is considered as "Worst possible scenario for stock markets", according to Bankinter: a Challenge of the results and a judicialization of the elections in the Supreme Court.
The experts are unanimous that the high participation and the large vote by mail due to the coronavirus -100 million-, will turn the long and long counting process. "It could spread over the next few days," says Susannah Streeter, an analyst at Hargreaves Lansdown. "There are signs that some investors are betting on safe haven debt, with US Treasury yields falling."
The consequences in the bags have not been long in coming. After what the tycoon has played the electoral fraud card, the Wall Street futures have turned around and they have been listed with a negative sign, the Ibex has dawned with falls that it maintains above 2% and European floors are in the red, with the Dax losing more than 1%. A logical behavior in the opinion of Neil Wilson, analyst at Markets.com, since "a long and drawn out court battle it is precisely what investors do not want ”.
"Donald Trump has called to arms declaring victory in the elections before the end of the count," explains this expert, sending the image of trying to protect the "integrity" of the vote. "You clearly want the count to stop," Wilson continues. “I don't see how Trump can structure a serious legal challenge in the Supreme Court against the states that count all the votes cast. It is about delegitimizing a Democratic victory and has the 'whiff' of despair”Round off.
In the short term, until the uncertainty about the result clears, “we can expect that investors become more defensive”Says Fabiana Fedeli, Robeco's board of directors, and some of the consequences of the" blue tide "that we have seen emerge since the summer and even more so in recent days are likely to slow down:" Emerging market stocks and currencies , including China, the issue of renewable energy (with the expectation that a Biden administration favors policies that are more respectful with the environment) and cyclicals on large technologies, "he lists.
"We are also likely to see some relief on possible consequences of a "red tide" victory, like oil, or Russia, which is a country that is expected to incur sanctions under the Biden administration, "he adds. “Ultimately, which side wins will not determine the direction of the stock market, but rather the sectors and, internationally, the selection of countries. What will really count is the type of policies implemented and the impact on the economy of the evolution of the Covid-19 outbreak ”, sums up the expert.
THE BATTLE FOR THE SENATE
In addition to the presidency, the markets are also very aware of Congress. For the moment, the House of Representatives remains bluewhile the Senate is still up in the air. “A president and a congress would be positive for the markets, be it blue or red. Markets do not like uncertainty, and a president with the support of Congress would allow for more effective policy execution, including a stimulus package. Any of the Administrations, supported by Congress, would implement policies to support the economy ”, indicates Fedeli.
From the point of view of equity markets, a Congress divided on this point is the least desirable scenarioRegardless of which party wins, as this could mean delays in the implementation of policies and in what we believe is a much needed stimulus package in the short term.
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