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Summary
- The stock market is predicting the Democratic nominee, Joe Biden, as the winner of US Presidential election to be held today (3 November 2020).
- The Dow Jones Industrial Average rose 1.6%, S&P 500 index was up 1.22%, while the Nasdaq Composite index increased 0.42% on 2 November due to a rebound in tech stocks and strengthening value stocks with the US election ahead.
- Analysts are predicting blue wave where Democrats will retake the White House and Senate, which could be a positive outcome for the stock market.
With the US Presidential election 2020 due today i.e. 3 November 2020, the stock market has already given a key signal of the winner. CFRA’s ‘Presidential Predictor’ is showing victory of Joe Biden, the Democratic candidate, defeating the present US President Donald Trump.
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On 2 November, stocks rebounded from a sell-off to October end, guided by a spike in COVID-19 cases, collapse in economic stimulus negotiations, and election volatility.
Dow Jones and S&P 500 indices closed higher on 2 November while Nasdaq reported leaner gains as investors tightened up for the upcoming market swings. Markets could be shaken up badly in the near term if there is no winner on Tuesday.
The Dow Jones Industrial Average rose by 423.45 points or 1.6% to 26,925.05, S&P 500 index gained 40.28 points or 1.23% to 3,310.24 and the Nasdaq Composite increased by 46.02 points or 0.42% to 10,957.61, as on 2 November.
Election outcome predictions and investor sentiment
In recent weeks, investors foreseeing Joe Biden as the winner have sparked a surge in solar stocks, industrials and small-cap names as his administration is expected to offer major fiscal stimulus and encourage green energy.
National opinion polls show that former Vice President Joe Biden kept his strong control over the weekend against President Donald Trump in crucial battleground states, ahead of the US Presidential election. However, polls in swing states that determine the election show a closer race.
Some analysts are predicting that financial markets are taking comfort in the fact that monetary policy across the world would remain loose and benefit share prices, even though the election does not yield strong results immediately.
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Blue wave predictions
Many are forecasting that a blue wave (Democrats in control of White House and Congress) would serve as an economic boost, as a broader stimulus package would undoubtedly be carried out, but a potential rise in taxes may force the growth to suffer beyond 2021.
Goldman Sachs has stated that a blue wave could raise the likelihood of a fiscal stimulus package of at least $2 trillion shortly after the 20 January launch. It also cited the long-term plans of Biden on climate, health, and education. Together, the investment would be at least proportional to the projected longer-term tax increases on companies and upper-income profits.
J.P Morgan also noted that the majority opinion is that a November Democratic win would be negative for equities. However, the result is seen as neutral to marginally positive.
