Joe Biden’s victory in the presidential race likely ushers in a near-term market environment dominated by low rates, a hunt for yield and growth stocks. A Democratic takeover of the Senate looks unlikely, which would constrain the Biden administration’s ability to implement large-scale fiscal stimulus and public investment, tax, healthcare and climate related legislation.
Joe Biden’s US presidential election victory was confirmed over the weekend, yet the likelihood that Congress will be split – with Republicans in control of the Senate – had buoyed markets.
Polls are suggesting a greater likelihood of a Democratic sweep in this week’s U.S. election. BlackRock are starting to incorporate themes they believe would outperform in that event, moving toward a more pro-risk stance overall despite last week’s market pullback.
This week is all about the US election and the ongoing pandemic. It’s also another big week for earnings in the United States and Europe
Markets are increasingly reflecting a unified Democratic government outcome that may lead to a significant fiscal expansion. This electoral outcome would bring forward the market pricing of the higher inflation regime that BlackRock were already reflecting in their strategic asset views.
Brexit negotiations, US politics and the ongoing pandemic will set the backdrops for markets once again. It’s also a huge week for corporate earnings.
Many companies may need to turn to private credit to restructure post-Covid. BlackRock see potential for such investments to serve as growth assets and diversifiers when new sources of portfolio resilience are needed.
The main themes of this week are quite familiar – the continuation of Brexit negotiations, the COVID-19 cases and restrictions that should give European markets direction. In addition, third-quarter earnings season heats up. It’s a similar story in the United States, with politics, stimulus and earnings likely to drive markets.
BlackRock zero in on the UK this week to highlight the three main signposts we use to assess the impact of the coronavirus: the pace of the economic restart, the state of policy support and evidence of permanent economic damage.
The US presidential election remains a key investor focus in Europe. Democratic nominee Joe Biden continues to lead the polls; however, President Donald Trump’s comeback in 2016 election proves that there is still scope for uncertainty over the final result. There is also risk of a contested result, which would imply prolonged equity market uncertainty.
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