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This is why Investors assume that with the Senate in Republican hands, the possibility of a tax hike diminishes.
The presidential race seemed to lean towards Democratic candidate Joe Biden, but Republican President Donald Trump promised to fight to the end in court if necessary.
So, in the same momentum it has taken since the beginning of the week, the New York stock market finished sharply up Thursday in a market that embodies the idea of a Biden mandate.
The Dow Jones Industrial Average grew 1.95% to 28,390.24 points, Nasdaq technology by 2.59% to 11,890.93 points, and the expanded S&P 500 index gained 1.95% to 3,510, 45 points.
In Europe, London gained 0.4% at the close, Frankfurt 2%, Paris 1.2%, Madrid 2.1%, Milan 1.93%. The Asian markets also experienced a day of optimism and closed with significant increases.
In Japan, the Nikkei Index gained 1.73% to its highest values this year, breaking the symbolic barrier of 24,000 points for the first time since January. The Topix index also rose 1.39%.
The Shanghai stock exchange rose 1.30% and the Shenzhen stock exchange by 1.67%, while in Hong Kong the Hang Seng index rose 3.25%.
“The probable Republican control of the Senate should curb attempts at higher taxes and greater corporate regulation, while the White House reduces trade tensions with other world powers,” said Russ Mold, chief investment officer of AJ Bell.
“Normally political uncertainty and a stock market rally don’t go together, but some assume that Biden won’t be able to do much if he ousts Donald Trump in the race for the White House, because the Senate will likely remain under Republican control,” added marketing analyst David Madden of CMC Markets UK.
The fragmented political landscape “will hinder profound changes in corporate taxation and the regulation of new technologies,” added Juichi Wako, strategist at Nomura Securities.
Thanks to this situation, tech giants Facebook and Alphabet (owner of Google) posted spectacular gains in the markets on Wednesday.
“It matters little who wins”
The final resolution of the political duel in the United States remains uncertain, even as Biden approaches the White House after winning in decisive states like Wisconsin and Michigan.
Investors were betting on the rapid creation of an ambitious state plan that stimulates the economy in the face of the recession caused by COVID-19.
“It doesn’t matter who wins”, observes analyst Axi Milan, “both sides will be forced to react quickly to the growing pressure on the American economy”.
However, Axa’s chief economist, Gilles Moec, was concerned “For now it will be very difficult to count on a stimulus before the arrival of the new administration” in January.
“Even if we imagine that a consensus will be reached for a minimal stimulus, I doubt it will live up to what was expected,” he added.
Time is running out and the situation of covid-19 worsens in Europe and the United States, where there is a record of almost 100,000 cases per day in the last 24 hours, a serious epidemic situation that worries the markets.
The Fed holds rates
For its part, the US Federal Reserve (Fed, central bank) kept key interest rates close to zero and called for a new reactivation plan, amid a “particularly worrying” increase in coronavirus cases.
The institution, which held its regular monetary policy meeting on Wednesday and Thursday, kept rates in a range of 0 to 0.25% with no surprises and will leave them unchanged until the labor market picks up, announced Thursday. its monetary committee.
Its president, Jerome Powell, said that in the face of a faltering recovery after the recession following the outbreak of the COVID-19 pandemic in the world’s largest economy, a new plan to support the economy “may be necessary”.
The $ 2.7 trillion recovery plan approved in March helped limit the damage to the economy, but its benefits are gradually coming to an end, and Congress is trying to find a deal between Republicans and Democrats for massive new aid. .
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