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“It’s very premature to read too much into market reactions as all outcomes remain in play and markets are prone to initially overshoot and undershoot as the flow of information changes,” he said.
The battleground states of Pennsylvania, Michigan, Georgia, Nevada, to name a few, could still swing either way, Holt said, and the same is true for the Senate race.
“If, for example, it turns out that Biden wins and the Dems ultimately take the Senate then violent steepeners could come back into play,” he said.
11:17 a.m. — Biden victory with a Republican Senate seen as worst scenario for economy
The difference between the status quo, with Trump remaining president, and what a blue wave would’ve meant for the U.S. economy is likely US$2 trillion, Jefferies global equity strategist Sean Darby wrote.
The Senate will play a crucial role in the stimulus discussions going forward and so in many ways, Darby said, the distribution of votes in the Senate “was the most important for equity markets rather than the Presidential election.”
A blue wave would’ve been the most beneficial for the fiscal spending and the economy, Darby said. A Trump win with a Republican Senate, which is still in play, would be the second-most preferred outcome for the economy. A Biden victory with a Republican Senate, however, would be the worst. In this scenario, there’s a much more difficult outlook for fiscal spending and without it, economy growth could flatline.
This more conservative outlook has pushed Darby to downgrade his prospects on both the U.S. energy and real estate sectors to modestly bearish. As for the S&P 500, he expects the index to wrap 2020 at 3,300 points, down five per cent from current trading levels.
10:55 a.m. — Avery Shenfeld, chief economist of CIBC Capital Markets
“On the stimulus front, while the final tally isn’t yet known, the Republicans have retained enough support in the Senate to still have a lot of sway in shaping a second package, regardless of who ends up in the White House. That may see House Democrats realize that there isn’t much to be gained by stalling until after Inauguration Day in January, so there are reasonable odds that they, and the White House, will move in the direction of a smaller, but politically feasible bill, rather than sticking to the $2 tn+ bill already passed in the House.”
10:30 a.m — Markets are shrugging off upcoming gridlock, David Rosenberg says