The markets today, Tuesday, viewed several hours before the opening bell show a global rally in progress. Major indicators in North America and Europe are all in the green ahead of results of the U. S. federal election.
While the likelihood of an absolutely final decision tonight is at least questionable and chances of social unrest following the election are much greater, some analysts believe that a feeling that ‘the end is in sight’ is generating some of the rally. While the North American markets have not opened at time of writing, European markets reflect this, according to Chris Beauchamp, Market Analyst at IG Group, a London stock firm. “European stock markets have rallied hard in early trading this morning, seemingly glad just to see voting underway in the US,” he says. “It looks like markets have decided to remain calm about the US presidential election, as European stocks move sharply higher in early trading.
A belief in many quarters that former Vice President and challenger Joe Biden will win leads to a belief in a major stimulus program.
While many analysts have suggested which sectors will do well or poorly if President Donald Trump wins a second term and which sectors will do well or poorly if Biden wins the Oval Office, what also remains to be seen is the position of the U. S. Federal Reserve and its connection to markets.
If re-elected, President Donald Trump can be expected to pressure ‘the Fed’ to hold down or lower interest rates which could lead to higher market valuations. If Biden wins the White House, he appears more likely to respect ‘the Fed’s’ independence.
Since its initial founding in 1913, various events (and various presidents) have shaped its role. Until the present crisis, the largest watershed in its history came with the financial crisis of 2008-2009. The current crisis and the next administration can be expected to define its role once again.
The nervousness extends to the general conviction that the results may not be known this evening. A Reuters report says that Biden is ahead in the national opinion polls but that races remain tight in battleground states that could tip the election to President Donald Trump. The same Reuters report also says that the outcome most likely to shake equity markets is not the election of either candidate --but the lack of an immediate winner tonight.
However, irrespective of the results, given the number of forces at work, it is reasonable to expect continuing volatility, COVID 19 strains, unemployment, recessionary influences and debt pressures.
As well as the election, the upcoming reports of several companies expected today will at least telegraph the near future in their sectors.
For a look at the pharmaceutical sector, the McKesson Corporation reports second quarter results today.
For another look at the shop-from-home trend Wayfair releases its third quarter results.
Related: Markets Fearing a Contested Election