Following a wild "election week," investment markets roared to life with uncertainties beginning to crystalize in both Washington DC and as it relates to the fight against the virus. With regard to the election, a "blue wave" didn't materialize across the nation, with a very close result in the electoral college tipping for President-elect Joe Biden and a likely divided congress (pending run-off elections in Georgia). Monday morning also brought good news on the development of a vaccine--one of candidates showing promise of 90% efficacy in preventing Covid-19.
2020 has been all about uncertainty. And while we are certainly not out of the woods as it relates to the virus, an effective vaccine is the first step to alleviating the effects of the pandemic. Divided government (should that be the result of this election) has historically proven to be a positive for the economy as legislators may be forced to work across the aisle. More certainty going forward can only be good for the economy and our nation.
Here's what we are reading this week:
A Democratic victory without Senate control is for now reinforcing existing market trends such as the hunt for yield and growth stocks.
A resurgence of Covid-19 cases has led to new national lockdowns in Europe, threatening to weigh on mobility and activity in the near term.
Data from the euro area and U.S. could shed light on the impact of the virus resurgence and new lockdown measures on the economic restart.
Over the weekend, Joe Biden was declared the next President. 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.
With Republicans likely to hold the Senate( pending a January run-off), expect a divided government. 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.
Markets like gridlock as it limits massive shift in legislative policies and uncertainty. On the investment front, winners may include financials, health care, industrials, multinational companies, and international companies.
Charts that Got Us Thinking -- Hartford Funds
Monday's news about the potential effectiveness of the Pfizer/BioNTech vaccine is promising as the first candidate of a possible vaccine. Markets re-acted with the potential promise of other candidates also being effective. As the first candidate, hitting a 90% rate gave the markets a "shot in the arm" providing a positive outlook for others in development.