By George Goncalves Dominique Dwor-Frecaut 29-10-2020

The US Presidential Election: The Possible Outcomes and Their Market Implications

(3 min read)
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Recent market moves have largely been driven by expectations that the Democrats are poised to win both the presidency and the Senate and that such an outcome would lead to large bouts of fiscal spending. With Treasury issuance stepped up accordingly and until the Fed adjusts its LSAP programs, the curve should steepen further.

In addition, even the equity markets have started to track the odds of a blue wave. In early September, the S&P500 made a new high on a low in the betting odds of a full Democrat sweep. However, post the first presidential debate, equity investors have been more open to the idea of a blue wave (with stocks tracking those odds) – possibly balancing the impact of a larger fiscal package that could offset some of the tightening from regulations and higher corporate taxes.
That said, we believe markets are being a bit too optimistic about a quick resolution to the election outcome and the potential for both a quick and large delivery of fiscal stimulus in the coming days.

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