At the start of the year markets were favouring Trump but leading up to election day the tables were turning. In the perception of many, economies perform better under a Republican president. Nevertheless, historically seen, the opposite is true.
Among various other indicators, private sector jobs have grown two and a half times faster since WWII under a Democratic regime. On the other hand, even though Biden has won one of the most anticipated elections in generations, it has not particularly been a blue landslide with the Senate being divided.
As a result, it will be harder for the Democrats to unroll ideas like tighten regulation and increase taxes, much to the relief of financial markets. Technology and healthcare stocks have rallied since and from an investment point of view this might be the best of both worlds, Republican taxation and Democratic spending. Nonetheless, it remains to be seen what the outcome of multiple lawsuits filed by the Republicans will be, if Trump is going to hand over the power peacefully and how US citizens will react in terms of social unrest. At the same time, considering the long-term firepower of the FED and a Biden victory albeit with limited power, there will be an accommodating fiscal and monetary landscape.
It is likely we will see increased levels of government expenditure in smart cities, infrastructure, freight, broadband, renewable energy and start-ups. On top of that, a stimulus bill is expected to pass, serving as a much-needed boost to the economy.
In terms of the trade war, or tech war as it is being referred to more frequently, the ideas of Trump and Biden do not actually differ that much. However, a Biden administration will practice a more constructive approach, as well as working closely with the EU, normalising relations. This will potentially remove some global tension creating a more cooperative environment for international trade. Overall this scenario is perhaps the most market- friendly result and so far global stocks have reacted accordingly Author: Tomas M Koolhaas, MBA (Advisory - Wealth Management / Astra Financial Services)
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