The winner of the US Presidential Race is still uncertain

5 November, 2020

Biden has some advantage in the presidential race, as he holds 264 electoral votes against 214 for Trump. However, the Democrats are far from a complete victory. The so-called “Blue Wave” has not materialised. It seems that the Senate is being left to the Republicans while the Democrats lead in the House of Representatives is set to decrease. This adjustment will hinder the progress of the relief package, which continues to depend on the ability of the opposing parties.

The winner of the US Presidential Race is still uncertain, and vote count continues. Both Trump and Biden say they are on their way to victory, but this confrontation promises to escalate into lawsuits and further counting of votes. The same, nose-to-nose race is taking place in House and Senate elections.

Previously, this scenario was assumed to be the most dangerous for markets. But despite the strong growth shown by stock indices, we need to rethink how different actual investor reactions can be.

Many observers note that demand for stocks and oil (signs of optimism) went hand in hand yesterday with the decline in US government bond yields and the poor performance of gold (signs of investor caution).

In our view, we should not look for clear market signals of total optimism or, on the contrary, signs of caution in the movements of the past day. The strengthening of purchases should be linked to deferred demand. In the last few weeks prior to the elections, American assets were under pressure, creating pent-up demand. Now, investments are supported by an inflow of new funds at the beginning of the month.

The fact that investors are buying both bonds and equities indicates a frame of mind for a prolonged confrontation between politicians in the coming weeks, leaving the central bank as the last line of defence for the economy.

The Federal Reserve will hold its next meeting today, where investors hope to see the readiness of the regulator to help the economy if necessary. Investors are not waiting for such steps from the Fed today but assume that they will hear hints of easing in December, as in the case of the ECB.

Earlier this week, the Reserve Bank of Australia lowered the rate and expanded QE, today the Bank of Japan and Bank of England both announced expansion of their QE programs. These actions by other central banks are helping the dollar not to look so weak, acting alone with the Fed’s massive quantitative easing. At the same time, these measures work to reduce the value of money and support prices for other assets such as stocks and commodities.


Source  
The soft tone of Fed members pushed the Dollar back down13 Jan, 2021  

In New York trading the US dollar reversed to a decline from the upper bound of the downtrend that began late September. Sellers of the dollar...

Stocks pause for breath as bond selloff extends12 Jan, 2021  

Stocks took a breather on Tuesday, easing from record highs as political turmoil in Washington and rising coronavirus cases gave pause, though a selloff in...

Low inflation drives up agricultural prices7 Jan, 2021  

Enormous government stimulus and a busy printing press have revived fears of out of control inflation that plagued economists after the global financial crisis when...


Dollar sinks as investors weigh Democrat gains in Georgia6 Jan, 2021  

The U.S. dollar slipped on Wednesday as Democrats took the lead in runoff votes that will determine control of the U.S. Senate and possibly pave the way for a big...

Oil prices little changed before OPEC+ resumes meeting on Feb output levels5 Jan, 2021  

Oil prices were little changed on Tuesday before deadlocked talks between major producers about potential changes in February output are set to continue...

When will stocks reach their ceiling?4 Jan, 2021  

It is a common perception that the pandemic has disrupted market fundamentals. Investors continue to buy shares of companies that are more than overpriced...


Oil falls $2 as new virus strain sparks demand worries21 Dec, 2020  

Oil prices tumbled by $2 on Monday, as a fast-spreading new coronavirus strain that has shut down much of Britain and led to tighter restrictions in Europe sparked...

Dollar Slips With Stocks Mixed. Oil Extends Gain11 Dec, 2020  

The dollar came back under pressure Friday as investors weighed fading prospects for a stimulus deal in Washington against disappointing U.S. jobs data. Stocks were...

Asia-Pacific markets fall as investors keep an eye on Brexit talks10 Dec, 2020  

Asia-Pacific markets mostly declined Thursday as investors kept an eye on Brexit trade talks as well as ongoing negotiations in the U.S. for a coronavirus relief package...