Market Update - Stocks Opened Sharply Higher
With the election still too close to call, US stocks opened sharply higher as market participants continue to express approval for a likely split Congress outcome. The potential benefits for corporate America are—at least for now—offsetting concerns about a contested election and drawn out legal challenges.
- The S&P 500 Index opened more than 1% higher, bringing its weekly gain to over 6%.
- European markets are up well over 1% in midday trading overseas.
- Asian markets saw big gains overnight led by Hong Kong and South Korea.
Bullish Scenario Emerging
The chances that presidential candidate Joe Biden gets any meaningful tax increases through what is very likely to be a Republican-controlled Senate are very low. Republican control of the Senate is not yet a done deal either, with several races yet to be called, but it looks very likely at this point. We take a look at some of the major market moves in the immediate aftermath of Election Day.
No changes to our forecasts as a result of the election
We see further gains for stocks between now and year-end regardless of who occupies the White House, and we expect additional gains in 2021 as the bull market continues. Our 2021 forecasts will be released in early to mid-December with the publication of our Outlook 2021 publication. Look for our November Global Portfolio Strategy report early next week.
Expect a quiet Fed meeting today
While the Federal Reserve (Fed) won’t announce any policy changes at its meeting today, Chairman Jerome Powell and company will take on added importance given the strong likelihood of a split Congress. With prospects for a multi-trillion dollar stimulus package dimming under a Republican-controlled Senate, the Fed’s ability to assuage market disruptions and support the economy if the latest COVID-19 outbreak worsens may take on greater importance in the months ahead.
US dollar may weaken further.
A possible Joe Biden presidency could be viewed as bearish for the US dollar by fostering more globally coordinated trade policy and less use of tariffs. We still favor US equities over those in developed international markets, but a President Biden could potentially help narrow the gap.
Election 2020 update
Both candidates remain shy of the necessary 270 electoral votes, however, the path to the nomination is becoming clearer. Votes are still being counted in several states, with attention focused on the count in Arizona, Georgia, Nevada, and Pennsylvania for potential swings in the projected outcome. While votes in Pennsylvania may take several more days to count, results in Arizona, Georgia, and Nevada are expected relatively soon (source: US Election Project).
Technical update.
Stocks are continuing their rally this morning, advancing for the fourth consecutive day. Despite large gains for major large cap indexes Wednesday, breadth was poor, with more stocks declining than advancing in both the S&P 500 Index and on the New York Stock Exchange. Gains were led by healthcare and mega-cap growth names, as growth stocks outperformed value by the widest single-day margin since January 2001. The continued rise sets the S&P up for a potential test of its record highs at 3588.
COVID-19 news.
New daily COVID-19 cases in the United States surpassed 100,000 for the first time on Wednesday, a 31% week-over-week increase that pushed the seven-day average increase up fractionally to 19.9% week over week (source: COVID Tracking Project). The global crisis is worsening as cases and deaths surged by daily records, per Bloomberg. AstraZeneca reiterated it expects vaccine trial data to be released before year-end.