Investors focus on undecided Senate as Biden edges in on presidency

In this news, we discuss the Investors focus on undecided Senate as Biden edges in on presidency.

NEW YORK (Reuters) – As Democratic candidate Joe Biden approaches the presidency, investors are focusing on the still undecided race for Senate control and the potential consequences for taxes, regulation and the outlook for stimulus.

The benchmark S&P 500 has jumped nearly 4% since polling day, in part due to expectations that divided control over Congress will make President Biden unlikely to make his calls to raise rates taxation of companies and capital gains.

The S&P 500 .SPX fell 0.2% on Friday afternoon, while benchmark 10-year Treasury bill yields US10YT = RR rose to 0.82%, their highest level since the election of the November 3.

Biden took over as President Donald Trump in the battlefield states of Pennsylvania and Georgia for the first time on Friday, putting him on the brink of winning the White House.

However, Georgia appears ready for the second round in January to determine its two Senate seats. Biden’s decision in Georgia has drawn investors’ attention to the chances Democrats could have more influence in the Senate. If they won those two rounds, it would give them a tie in the Senate and give Kamala Harris a deciding vote.

Two more Senate races remain undecided, although Republican Senators Thom Tillis of North Carolina and Dan Sullivan of Alaska lead those contests.

“There’s some concern about whether Biden will advance or win Georgia, so there’s a chance those seats will follow. This is what people read. They say, ‘OK, if there is that kind of momentum for the Democrats, maybe the Senate (scrutiny) is not over yet. “There is a bit of hesitation,” said Yousef Abbasi, global market strategist at StoneX Group Inc.

Justin Hoogendoorn, head of fixed income strategy at Piper Sandler in Chicago, said: “Even if (the Democrats) get a Senate seat, it just becomes more plausible to pass legislation. The closer they are to this, the more plausible it is. “

Unstable control of Washington is likely to weigh on markets as the United States continues to post a record number of daily coronavirus cases.

“If it’s contested, it adds a little bit of uncertainty” to the markets after investors started to assess in a divided government, said Scott Brown, chief economist at Raymond James.

Delays in the vote count also increase the risk of legal action, leaving investors in limbo, said Simon Harvey, currency analyst at brokerage Monex Europe.

“I think the big risks to the markets are now if this isn’t over quickly – say Monday – especially given the level of traction a Biden Presidency has gained during the day,” he said. declared. “Any lack of clarity on the outcome before Monday suggests that markets will have to prepare for a truly contested election with a series of court rulings.”

Yet despite the uncertainty, expectations of short-term market volatility have waned. The Cboe .VIX volatility index has fallen more than 11 points since last Friday, on track for the biggest weekly drop since early April. VIX futures also fell sharply.

Few investors are calling for a sharp drop in stocks, supported in large part by unprecedented levels of financial support from the Federal Reserve. The central bank said on Thursday it would do whatever it can in the coming months to support the U.S. economy.

It created the fewest jobs in five months in October, as the number of part-time workers increased, the clearest evidence to date that the resumption of the pandemic recession was slowing as new cases of COVID- 19 exploded.

Some investors are starting to return to stocks that would benefit from a Democratic sweep from Washington. On Friday, clean energy exchange-traded funds jumped more than 1.1% at the start of the session, while tech stocks – seen as more likely to face tighter regulations and more motivated sales. taxation if the Senate passes to Democratic control – slipped 0.5%.

“The focus now is on Georgia and the Senate, because that’s really going to define what happens next,” said Ken Polcari, Managing Partner at Kace Capital Advisors. “But if Biden comes in and the Senate turns around, then we’re back to sweeping.”

Additional reports by Herb Lash, Ross Kerber, Chuck Mikolajczak, Saqib Ahmed and April Joyner; Written by David Randall; Edited by Megan Davies and Dan Grebler

Original © Thomson Reuters

Originally posted 2020-11-06 23:46:11.

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