With many of the US states too close to call in the 2020 Presidential Election, there are several aspects of the election that are already having a knock-on effect on society and the economy as a whole. As President Trump and Joe Biden go head-to-head for the White House and Congress, there are only a handful of issues we can discuss with any degree of certainty.
1. Divided Congress could restrict new fiscal packages
The financial markets seem to believe that a so-called “blue wave” victory for Joe Biden and the Democrats in Congress would result in a large-scale stimulus package. However, a Republican-controlled Senate and a Democratic House poses considerable challenges to Biden launching a full-scale spending plan, underpinning the US economy that’s been unduly affected by the socioeconomic issues of 2020.
Tom McLoughlin, head of fixed income at UBS Global Wealth Management sought to allay fears that a “divided government” would result in no fiscal stimulus whatsoever. Although McLoughlin did admit that the size of the package would be “a shadow” of what it could have been.
2. Safe haven stocks sought to preserve funds
Despite President Trump’s false declarations of securing re-election for a second term in office, there are concerns that uncertainty surrounding the closeness and validity of counts in some US states could cause fragility and uncertainty in the financial markets. Were President Trump to contest the result of states won by the Democrats in the Supreme Court, markets will almost certainly be volatile.
A plunge in bond yields also indicates an escape to safety and a fall in confidence regarding spending stimulus packages that will increase the national deficit. Meanwhile seesaw stocks also reinforce the growing widespread anxiety. S&P 500 futures shifted from profit to loss almost ten times in 12 hours until 6am EST. Consequently, stocks from tech giants like Amazon, Apple, and Microsoft have benefitted most from the lack of trust in the markets, serving as a haven for investors looking for a place to park their funds.
3. Businesses will have to handle fragmented staff, clients, and stakeholders
Whatever the election results, the country is more politically involved than it used to be. With the on-going pandemic, the average voter will have numerous considerations going into the election, from the societal impact of crises such as Covid-19 to its undoubted financial implications. As such, turnout is historically high and many states vote early, far exceeding the 2016 total. However, it seems like a thing of the past for voters to split votes, choosing candidates strictly according to party line. Companies are also increasingly dealing with political and social issues in addition to pursuing profit. This is a double-edged sword.
Bryan Sanchez, of Lionstone Investments, is hopeful that this period for society and the economy is “a low point” in America’s “unity” and that whoever wins will look to “rebuild” and heal the divide from here, whatever the outcome.
It could be several days, if not weeks, for the picture to clear on the race for the White House. Any potential legal wrangling will not be an overnight process, but it’s critical to get the right outcome for the future of US democracy.