Over the weekend, challenger Joe Biden was universally named the President-elect. The 2020 election took longer to decide than most elections. Voter turnout was one of the highest in modern history as a percentage of eligible voters and over half the ballots cast were mail-in-ballots. In Congress, Democrats lost seats but still will maintain control of the House of Representatives, while Republicans will likely eventually hold their Senate majority, though races in Georgia are headed to a January runoff. Since investors believe Republicans will likely win at least one of the Georgia elections, the divided result of the election is what the markets have favorably embraced.
We believe a divided government presents investors with a potential best-case scenario: fiscal stimulus with no tax increases. Both political parties know the importance of additional fiscal stimulus for this fragile economic recovery, however, each side remains split on its size and composition. We still expect a stimulus package of some kind that perhaps could be passed during the lame-duck session, but it will probably be much smaller than hoped given the lingering disagreements and recovery in the labor market seen in Friday’s payroll report. President-elect Biden ran on a platform of tax reform and climate change; however, the divided government will likely keep the market-disrupting aspects of this referendum in check.
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Commentaries are published by Cetera Investment Management LLC, an SEC registered adviser owned by Cetera Financial Group. Cetera Investment Management provides market perspectives, portfolio guidance, model management, and other investment advice to its affiliated broker-dealers, dually registered broker-dealers and registered investment advisers.
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