Yahoo Finance The stock market loves Joe Biden – at least for now
Financial markets are fickle. They react with incredible speed and force to news that is likely to impact on trading conditions, the economy, policy changes and company profits.
Be it the price of shares, foreign exchange markets and bonds, a mix of savvy traders, computer trading and strategic judgment mean prices of financial products can and do move with new news.
And so it is with the US election result, even though there is some uncertainty about the path to a Biden Presidency.
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It is a bit hazardous to write an article on markets when additional information on the election and politicking can and will change things before it is posted.
It was interesting to see markets move as the votes were counted. US stock futures surged and fell and surged again. They fell when Mr Trump said he would take parts of the election result to the US Supreme Court but bounced back when this was seen as bluster with next to no chance of changing the election result.
But as things stand, just a day after the votes started to be counted and before the dust settles, it is increasingly clear that Joe Biden will be President of the US.
US stocks jumped sharply as this news filtered through as the counting continued.
The S&P 500 index rose 2.6 per cent; the Nasdaq surged a stunning 4.0 per cent. Global markets followed this positive lead.
The bond market rallied (lower yields) and the US dollar fell as a result.
There seems to be a vote of confidence in the Biden economic platform, one which will aim to unite the US population, promote rather than hinder global trade and one that will help the US to overcome the COVID-19 pandemic which is crippling the US economic recovery.
To be sure, it looks like Biden will have trouble with Congress given the Republican Party is likely to have a majority in the Senate, but as US Presidential history shows, this is usually a marginal constraint on the big picture policy agenda of the President of the day.
For now, the markets are positive about the election outcome.
A Biden win will mean a stronger world economy
The weaker US dollar will be helpful for the US economy to gain competitiveness on the international trading stage.
For Australia, some calming of the trade tensions between the US and China will be a positive, even if the Australia – China relationship is currently fragile at best.
The world will be better with a strong US economy.
The path to economic recovery remains rocky with the third wave of COVID-19 risking a slump later in 2020 and into early 2021.
If Biden can start to unite the US, address financial inequality issues and renewable energy, the economy will be assisted over the medium term.
For now, the knee-jerk reaction of markets has been positive. Better economic news and policy reform will be needed to lock that it.
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