Here’s what the Biden presidency expects for stocks, bonds and commodities

The victory projections for the former vice president come amid the solid balance of the COVID-19 pandemic that had framed much of the competition.

This is what the changing political landscape means for Wall Street investors.

Joe Biden wins election

Regardless of victory in the 2020 elections, Analysts said a declared winner and therefore less electoral uncertainty paves the way for even higher US stock prices, even with President Trump’s campaign, as recent as Saturday morning, declaring his intention. contest the election results. in various states of the battlefield.

Additionally, many investors had designated a Biden presidency, but a Republican Senate, as the most likely outcome long before the November election, and therefore had sufficient time to weigh the possible implications.

“This is a known result. Risky assets like certainty, ”said Scott Kimball, portfolio manager at BMO Global Asset Management, in an interview before AP CNN, NBC and Fox News on Saturday called the presidential race for Biden. morning.

“A politically divided Congress takes extremes out of hand,” added BMO’s financial manager, removing from the equation the more ambitious measures of Republican or Democratic political agendas.

The S&P 500 SPX Index, -0.02%
finished last week’s trade at 7.3% this week alone, defeated by the 9% gain on the high-tech Nasdaq Composite COMP,
+ 0.03%.

The big story now might be how stocks with fast growing earnings compare to stocks of more economically sensitive companies.

Biden may find it difficult to push for stricter regulatory and antitrust action against some of the tech companies, such as Google parent company Alphabet GOOG,
-0.09%

GOOGL, -0.15%,
now facing antitrust and Facebook FB lawsuit, -0.43%
which is threatened by Congress by challenging Section 230 of the Communications Decency Act, jeopardizing the platform’s protection from liability as a publisher or content provider.

As investors lower their expectations of the size of yet another Congressional financial aid package to fuel the economic recovery from the coronavirus pandemic, U.S. Treasury yields may fall, increasing the value of earnings. Future Growth Stocks, Esty Dwek, Head of Global Macroeconomic Strategy. for Natixis Investment Managers, he told MarketWatch.

Captivity

Given that Biden is likely to face opposition from Republicans in the Senate, a less ambitious fiscal policy is expected. In this scenario, bonds will continue to rally, with debt holders having less to fear from higher inflation expectations that would result from a faster economic recovery and increased debt issuance.

Stock markets may rejoice at the prospects of a divided government after the U.S. election, but the question remains open as to what else the Federal Reserve can do to fuel an economic recovery from the pandemic after an already huge expansion in its balance earlier this year. .

10 Year T-Bills Give TMUBMUSD10Y, 0.815%
It is at 0.78%, after hitting 0.94% on Tuesday night, when hopes peaked following a Democratic sweep of Congress and the White House and another massive fiscal stimulus. Therefore, Treasury bond yields are expected to remain low or fall further when Biden enters the White House.

Jim Cielinski, global head of fixed income at Janus Henderson, said one of the biggest risks that market participants may be ignoring is the potential for economic stagnation.

“I know everyone is worried about inflation. I’m not, ”Cielinski said Thursday during a webinar hosted by Janus on the impact of elections on markets.

Instead, he’s more concerned that the Federal Reserve’s commitment to keeping benchmark interest rates close to 0% over the next several years is not enough to boost private credit and growth. economic or to stop the “growing stagnation to large parts of the economy”.

Raw materials

For CL.1 crude oil prices,
+ 0.94%,
a Biden victory could put further constraints on the energy market, including shale production. Biden said he plans to ban new permits for oil and natural gas drilling on federal lands.

The production restrictions could lead to tighter supplies and higher oil prices, analysts said. Yet Biden has also indicated he could revive the Iran nuclear deal and a relaxation of sanctions that could lead to more oil on the Islamic Republic’s global market.

Meanwhile, Biden’s victory, combined with an eventual divided government, is likely to create uncertainty over the size of future fiscal stimulus, a boon for safe-haven assets like gold.

Emerging Markets

Equities in developing markets, and particularly in Asia, can thrive if the Biden presidency leads to a more stable foreign and international trade policy.

Less geopolitical uncertainty will attract more investors to Asian assets, Dwek said, and these have already registered strong gains thanks to the region’s strong public health response to the COVID-19 pandemic.