January 16, 2021

US election 2020: What does a Biden presidency with no Blue Wave imply for markets?

David A Meier

Joe Biden has overtaken Donald Trump with late wins in Wisconsin and Michigan. The main focus now shifts to the Midwest, the place wins in Arizona and Nevada would crown Biden as President – authorized motion pending. Because the Senate now appears unlikely to flip, the Democratic Sweep situation has didn’t materialise, and a situation with a cut up authorities is now extremely doubtless.

Day Two after the elections has dawned, and the ultimate outcomes of the three races are nonetheless not in but. Within the presidential election, the Democratic candidate seems to have received Wisconsin and Michigan and is now solely 17 electoral votes in need of profitable the presidency. After Trump had received Texas and Florida surprisingly clearly and brought a lead in most different swing states favoured by Republican-heavy election-day voting, the state of affairs modified with the counting of the mail votes that favoured Biden.

As the important thing swing state of Pennsylvania will most certainly go to Trump, the main focus for Biden is now within the Midwest, the place he’s main in Arizona and Nevada. The electoral votes of those two states could be adequate for him to win the 270 electoral votes essential to turn into President, whatever the different swing states that stay open, Georgia and North Carolina. The shut consequence, now favouring Biden, prompted Trump to query the legitimacy of the rely of mail votes, to demand a recount in Wisconsin and Michigan, and try and cease the counting within the Midwest. The tenting groups are gearing up for a authorized battle, and the likelihood of civil unrest is on the rise. Nonetheless, we’d belief American establishments (courts) to safeguard democracy.

The Senate elections are the place the Blue Wave didn’t materialise. With the present stand of counting, neither celebration might to date win a further Senate seat, with six seats nonetheless open.

Preliminary outcomes recommend the Democrats would possibly win in Arizona, however different 5 seats will doubtless go to the Republicans. So, the Democrats can solely slender the hole to the Republican majority to 2 seats. Whereas the ‘Blue Wave’ has not materialised, the probability of a cut up authorities has risen, as a result of the doable stalemate within the Senate elections makes the Biden vs Cut up Congress or the established order eventualities most certainly.

In a primary response, the US greenback strengthened in response to the uncertainty, because of its secure haven traits, and fairness markets started to cost out the Democratic Sweep situation. Past these short-term reactions, cut up governments are usually not probably the most beneficial outcomes for progress and the US greenback, as they might present much less fiscal help past the following coronavirus emergency stimulus.

(David A Meier is Economist with Julius Baer. Views are his personal)