Broker Check
Election Over...?

Election Over...?

November 05, 2020

So, the election is over!

But, is it?  Seems like a lot of people are scratching their heads this morning.  We need answers...we need clarity, and most of all we need to have confidence in the integrity of the process.  Votes are still being counted and the final outcome is most uncertain.

So, if the market hates uncertainty, why is it significantly higher this morning after the election night drama? Over the past several weeks a lot was made of the damage the market might sustain if we indeed ended up with a wholesale blue wave or with this undecided scenario.  Hence, the confusion.

In reading this morning and listening to the experts, the most plausible explanation is that the market is relieved there will be no radical policy changes forthcoming due to the apparent balance of power in the senate.  

Tech stocks are surging because it is unlikely, since the election gave no single party control over all three branches of government, they will be facing regulatory scrutiny.

Since big tech has such a heavy influence in the weighting of several indices, they are noticeably higher this morning.  It appears the market is running ahead of the probability that the senate is now unlikely to implement a progressive tax agenda.  We should now not be facing the $4 trillion dollar tax hike Biden’s camp was considering and the energy sector is not facing the carbon tax. The fear of a sizable increase in capital gains and corporate taxes is fading.

Even though there is still a great deal of uncertainty on the horizon, there is little chance now that policy changes are going to drastically alter earnings.  All this relief added to the much needed bounce from an 8% decline which began on October 12, and the market is stretching it’s legs.