S&P500 +7.47% (3,509.44); NASDAQ +9.01% (11,895.23); DJIA +6.87% (28,323.40)
This week’s reports
- US stocks staged their best week since April after the apparent narrow victory of Joe Biden in the US presidential race was paired with the probability of the Senate remaining in Republican control. With the Democrats unable to sweep both houses of Congress as well as the presidency, as some had expected, there is less likelihood of enacting many of the major policy changes discussed during the campaign, such as major tax hikes, a rollback of the 2017 corporate tax cuts, or additional significant regulation. Tech stocks surged as concerns about big changes to US anti-trust laws eased. Investors were also encouraged by better-than-expected economic data across the board.
- A divided government also points to a smaller fiscal stimulus package, which may mean that there may be an increased burden on the Federal Reserve to offset any slowdown resulting from rising COVID-19 infections and restrictions. This strengthens the expectation of interest rates staying lower, for longer. In total, it appeared that the tight outcome of the election ensured that the key elements of the equity bull market would remain in place for the foreseeable future.
- European stocks moved higher, with the STOXX 600 logging its biggest weekly gain since June, with the positive reaction to the US election outweighing concerns about new lockdowns in Europe and the risk of a double-dip recession.
- Emerging market stocks had their best weekly gain in five months as Democratic candidate Joe Biden inched close to winning a tight US election that has also weakened bets for a major US fiscal stimulus, strengthening expectations that the burden of economic stimulus over the months ahead would remain with the Federal Reserve and other central banks funneling yet more cash into the financial system.