Joe Biden looks set to clinch the prize and become the next US president, despite threats of recounts and lawsuits from the Trump campaign. The dollar was volatile on election day, but stocks rose steadily and continued to rise once the result became clearer. The incoming administration will be looking to inject fresh stimulus into the world’s largest economy, with an emphasis on Democratic themes like green energy and healthcare reform. However, with no working majority in the Senate, and the post-Trump Republicans likely to return to their demands for small government, the Democrats may find they have less fiscal firepower than promised on the campaign trail.
Away from the immediate stimulus, Biden will be looking to undo many of Trump’s policies. We will likely see a less adversarial approach to Beijing and a more multilateral approach to international trade in general. This is good news for large US companies with global supply chains.
Domestically, the Democrats will push for minimum wage increases and a stronger social safety net. The party says this can be funded by reversing Trump’s signature tax cuts, but whether this can get through the Senate is another story. Higher corporate taxes would be a drag on corporate earnings, and therefore the S&P 500. Biden is a centrist Democrat, however, so even if successful, it is unlikely we will see tax rates far above their pre-Trump levels.
The UK’s new lockdown came into force on Bonfire Night. The pound weakened after the initial announcement, as investors anticipated a hit to the UK’s economic fortunes. In response, chancellor Rishi Sunak extended the furlough scheme, and the Bank of England said that it will continue to buy bonds to finance the government’s yawning deficit, which is running at around 20% of GDP. The Office for National Statistics reported that the UK’s debt pile has now exceeded the size of the economy for the first time since 1960.
Staying in the US, a House subcommittee published its investigation into the dominance of Big Tech. The 450-page report focussed on four companies: Apple, Amazon, Facebook, and Alphabet. The investigation found that all four had engaged in anti-competitive behaviour and formed effective network monopolies. While intended to pave the way for antitrust lawsuits, the report could also be read as making the investment case for each company.