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CNF Focus | How is the market after the US election?

How is the market after the US election?

At 11:30 a.m. ET Saturday, the Associated Press announced that Biden had won Pennsylvania, receiving 270 electoral votes and will become the 46th president of the United States. In addition to the Associated Press, major U.S. media outlets including the New York Times, CNN, Washington Post, CBS, NBC, and Fox News all issued election updates on the same day, stating that Democratic candidate Biden had won the presidential election with more than 270 electoral votes[1].

Western dignitaries then congratulated Biden[1]:

European Commission President Von der Leyen congratulated Biden and said that "As the world continues to change and new challenges and opportunities appear, our renewed partnership will be of particular importance."

German Chancellor Angela Merkel issued a statement saying, I sincerely wish him the best of luck and every success and I would also like to congratulate Kamala Harris, the first female vice-president-elect in the history of your country.Our transatlantic friendship is irreplaceable if we are to master the great challenges of our time.

French President Emmanuel Macron congratulated Biden on his victory, The Americans have chosen their President. We have a lot to do to overcome today's challenges. Let's work together!

Canadian Prime Minister Justin Trudeau says he is looking forward to working with the new government to address "the world's biggest challenges," including climate change.

British Prime Minister Johnson, while having a much more relaxed relationship with Trump, also tweeted, Congratulations to Joe Biden on his election as President of the United States and to Kamala Harris on her historic achievement. The U.S. is our most important ally and I look forward to working closely together on our shared priorities, from climate change to trade and security.

Although Trump is still denying defeat and plans to launch a lawsuit, hopes of a reversal are slim.When Bush and Gore took the vote counting issue to the Supreme Court in 2000, the dispute over the votes was limited to one state, Florida. This year, Trump needs to win back at least four states, including Nevada, Wisconsin, Pennsylvania and Georgia, to win, which can be very difficult. Up to now, Trump has not disclosed any credible evidence of vote fraud, and his lawsuits in Nevada, Georgia and Michigan have been dismissed[2]. It is reported that some officials on Trump's team, even along with First Lady Melania, are already trying to persuade Trump to accept his defeat.[3]

Lack of media publicity, support from the Republican Party and evidence of substantive litigation will make it difficult for the Trump family to change outcome of the current defeat.

Short-term impact

In the few days after November 3, the Nasdaq and S&P have risen. The Hang Seng Technology Index, the CSI 300, and the Nikkei have hit new highs this year. For a time, the world market is gaining momentum.

Some people attribute this rise in United States stocks to the "blue wave" expectations fading, that is, the Democratic Party will not win both the President and Congress. In this outcome, the policy direction will tend to be more gradual and moderate. The tax policy and strengthening financial regulation that democrats have been hoping is difficult to be implemented in a short time. Jeremy Siegel, a professor of finance at the Wharton School of the University of Pennsylvania, said that a divided government is excellent for the economy and the stock market[4] and that Biden, a veteran politician with the strength of working across party lines, has a moderate policy bias. Roger McNamee, co-founder of Elevation Partners, said of the potential impact of a divided government on tech stocks. "A divided government means a balance of power and less regulatory pressure on Wall Street. If you're an investor in FAAMG, that's probably the best case."

In the short term, the disappearance of uncertainty is the biggest positive for the market. Trump’s Twitter style and unpredictable policy operations were always affecting the market, and now this uncertainty is about to disappear. Before the election many funds were in a wait-and-see state, now as government policies and style become gradually clear, these is a need to allocate those funds.

Medium-term impact

The COVID-19 will continue to be one of the major factors affecting the markets. In the election victory speech, Biden said that he would establish a plan to deal with the COVID-19, which would be implemented from his first day in White House. This week, good news came from the development of vaccine with Pfizer announcing that its mRNA vaccine had an efficacy rate of over 90%, significantly exceeding its previous expectation of 60%-70% efficiency. According to Pfizer's plan, it will apply to the FDA for an emergency use authorization in the third week of this month and will likely be approved within the year[5]. Goldman Sachs chief economist Jan Hatzius team believes that in the event that Biden is elected President of the United States and the vaccine is successfully approved, the global economy will have a V-shaped recovery and the degree of rebound is likely to exceed market expectations[6].

If there is an expectation of a controlled epidemic, it is likely that the liquidity previously released in response to the epidemic will be gradually tightened. In the future, the third round of the U.S. stimulus bill, even if introduced, will probably be the last round. If the economic rebound to push the dollar index up and cause liquidity tightening expectations, U.S. stocks may face a correction.

In addition to the COVID-19, the Senate election could be another focus of the market.

Both the presidency and the House of Representatives have been decided, but the fight for the Senate is still not over, and there is actually still a glimmer of hope that the Democrats will control the Senate. Currently the Democrats control 48 of the 100 seats in the Senate and the Republicans control 50, with only two votes in Georgia being uncertain.

Since none of the four candidates from either party in Georgia received 50 percent of vote in the Nov. 3 general election, a runoff will be held on Jan. 5 to determine where the seats will ultimately go. If the Democrats can pick up the last two seats, the two parties will be tied 50-50 in the Senate. Under U.S. law, in the event of a tie, the Senate President held by the vice president is entitled to cast the 101st vote, and then Democratic Vice President Harris would take control of the Senate by that one vote margin.

Georgia's race should have been boring, as the state has had a Republican senator for 20 years and its current governor is a Republican. But Georgia's unexpected blue flip in this year's presidential election and the fact that the Republicans didn't have a clear advantage in the Senate race have given the Democrats hope. Both parties are now taking the final race in January extremely seriously. According to the U.S. media, the Republican Party has raised at least $100 million in campaign funds for Loeffler alone, and the Democrats have raised similar funds for Warnock [7]. The Republicans can win by taking one seat, but the Democrats would need to win all two seats, which would be more difficult. If the blue wave suddenly strikes, it will undoubtedly be another black swan for the market.

Long-term impart

In the next presidential term, boosting the U.S. economy, which has been deteriorated dramatically by COVID-19, will undoubtedly be the most important issue. Unlike the Trump regime, which actively promote massive tax cuts and easing restrictions, Biden will clearly build a "big government," which means increasing taxes on the wealthy and corporations while increasing employment by expanding infrastructure investment.

Biden’s investment plan is huge and promises to invest US$2 trillion in renewable energy and public infrastructure in four years. This will be the largest government-led investment plan since the Great Depression. It can promote photovoltaics, wind power and other new energy and the development of electric vehicles. It is estimated that the plan may increase the US economic growth rate by nearly 3% in 2022, but whether it can be implemented depends on the progress of cooperation between the White House and the Congress. [8]

Biden plans to raise taxes to fund the massive investment program. The plan to raise the corporate tax rate from 21% to 28%, while raising taxes on the wealthy, is estimated to increase fiscal revenue by more than $4 trillion over 10 years. [8] Biden wants to reduce the gap between the rich and the poor through tax rates and provide support for medical expenses and education expenses for the low-income class. But the tax changes must be approved by both houses of Congress. There is still uncertainty about whether the final plan will be compromised and when it can be passed. Tax policy is very important for U.S. stocks. One year after Trump enacted his tax cut bill, profits of S&P 500 index companies increased more than 20% for three consecutive quarters to record levels [9]. If the tax increase bill is passed, the stock market is unlikely to be optimistic.

Biden belongs to the moderate wing of the Democratic Party in terms of strengthening the supervision of technology companies. He supports the passage of antitrust laws to strengthen the regulation of large corporations, but he has yet to express his support for the Democratic Party's radical left to spin off large corporations.

Biden has given climate change a very high priority and plans to return to the Paris Climate Agreement as soon as he takes office. In addition to large investments in green energy, the market expects that Biden may set a goal of carbon neutrality by 2050 and introduce policies that are detrimental to the extraction and use of traditional energy sources.

In foreign trade and diplomacy, Biden has long been an internationalist. When Biden was Obama’s Vice President , the United States was very active in trade agreements. The market expects that the Biden government will sign trade agreements with other countries to lower trade barriers, and there is possibility of improvement in the trade conflict with China. At the same time, he will work more closely with Western allies and use international institutions to promote global goals. The United States will reinforce cooperation with the WTO and introduce new system in areas of rules for drug accessibility, trade and climate change, and dispute settlement mechanisms.


[1] 尚风,格隆汇《拜登宣布赢得大选,特朗普拒绝承认,密歇根州发现6000张选票错投给拜登》


[2] 卞磊,环球网快讯,中国新闻网《外媒:美法官驳回特朗普团队在内华达州提起的诉讼》


[3] 立场新闻《前總統布殊祝賀拜登當選 指民眾應信選舉公平 據報梅拉尼亞曾勸特朗普認輸》


[4] RUIXUE,金十数据《选情白热化,金股债会怎么走?》


[5] 于旭东,华尔街见闻《全球市场为何突然暴涨?辉瑞和BioNTech疫苗实验比“最好的预期还要好”》


[6] 曾心怡,华尔街见闻《高盛:拜登+疫苗=全球经济V型复苏》


[7] 潘凌飞,华尔街见闻《真正决定全球市场命运的时刻:明年15日》


[8] 云夕,日经中文网《拜登的“大政府”支出:10年将增10万亿》


[9] 云夕,金十数据《创4月上旬以来最大单周涨幅后,美股将何去何从?》


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