The US election results are in: What next?

12 November 2020

Brian DaingerfieldHead of G10 FX Strategy

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After what was a dramatic week of US election activity, we outline the key outcomes so far and what to expect next. 

  1. President Elect Biden – Biden’s win in Pennsylvania over the weekend delivered him a majority of Electoral College votes. President Trump has already begun waging lawsuits, including in states were vote counts are not yet complete. While his primary message has been to “STOP THE COUNT” (his emphasis), Trump’s team have begun lawsuits across a number of fronts. Several of those suits have already been thrown out. Recounts are also likely in some states.
  2. The Senate majority is unlikely to be decided until January - With both Georgia seats likely to head to a runoff election in January and outstanding results in Alaska and North Carolina each favouring Republicans, the Senate may sit at 50/48 or 49/48 for Republicans with two races to be decided in January. The odds are slim, but a “blue sweep” is mathematically still alive.
  3. Fiscal Stimulus in 2020? Unlikely, and also smaller: We are not confident that the election result is definitive enough for the two sides to come together on fiscal stimulus. Both Republicans and Democrats may be able to claim a mandate from Tuesday’s contest, deepening partisan divides. We expect Senate Republicans to push for a small, targeted bill while Democrats hold steadfast hoping for a larger bill, with help from a possible President Biden down the road.
  4. Market Reaction: Risk assets have performed admirably in the current environment, despite this being considered one of the worst case scenarios for risk appetite (both for NWM Strategy and, we believe, for the market consensus). Lower US yields post-election may have been helping buoy risk appetite globally, and may be contributing to a weaker USD as well. More recently, market optimism over positive results from recent vaccine testing has also supported risk assets.
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