When America went to the polls 2 weeks ago, there was plenty of speculation about the results – and the effects on the economy, not just of the US, but of the entire world.
Joe Biden secured the presidency on Saturday, passing the 270 Electoral College votes threshold needed to win the White House before all the results were in.
Incumbent President Donald Trump is desperately trying to hold on to his job. But with a lead of more than 4 million votes nationwide, President-elect Joe Biden looks certain to become the 46th POTUS.
At Continuum we are looking at the economic impact – and at whether a boom could be on the way.
A tonic for the markets
The US economy is still arguably the largest in the world, and almost certainly the most significant for global trade.
With “Make America Great Again” protectionism the initial years of President Trump were positive for the US domestic market, seeing its longest economic expansion and bull market on record. His trade wars and unpredictability, however, did very little for the rest of the world.
It was the financial disaster of Covid, which doomed his great American revival and the hopes of millions of Americans that may actually have brought him down, but the results on the world’s financial outlook seem to be dramatic.
His defeat has eased fears about a continuation of a damaging trade war between the US and China, the world’s two biggest economies, and reduced the worries about sanctions with other trading partners, including the EU.
The impact could be seen in stock markets around the world on Monday. There were immediate gains in Asia, with Japan’s Nikkei hitting a 29 year high after the confirmation of the result over the weekend. China’s Shanghai Composite was up by about 2% while Hong Kong’s Hang Seng and South Korea’s Kospi added just over 1%. Indices in France and Germany saw similar increases.
A boost to the US economy could mean a boost for the UK. The US was the UK’s main export market for goods and services, with a total trade flow of approximately £190.5 billion pounds in 2018.
The FTSE 100 topped the 6,000 mark for the first time in a month jumping by as much as 1.7%, or more than 100 points, in early trading.
The effect may be more than simply a knee-jerk reaction to the election. Markets had already seen a strong run last week as soon as it started to look that Mr Biden was on course to amass enough electoral college votes to defeat Mr Trump. It now looks as though markets are making a considered response.
What happens now?
This optimism is sorely needed. Sentiment weakened by fears about the impact of rising coronavirus cases and new lockdowns has meant the worst economic downturn in roughly a century.
The positive mood may continue across the Atlantic. Joe Biden is perceived as being more friendly for trade, and with the Republicans indicating an unwillingness to back large scale fiscal stimulus, more monetary easing from the Fed is probably on the way. A $4Trillion stimulus package is also being discussed by the Biden team.
It might be too early to start forecasting a post election boom, but the election may pave the way – and there has been good news about Covid at last.
The success of the latest coronavirus vaccine trials announced by Pfizer and BioNTech could pave the way for the rollout of a vaccine. This will be literally a shot in the arm for a world ready to get back to work. There is already speculation that the vaccine could be ready by Christmas.
If Covid can be controlled, and the problems that have been dogging global trade solved, the outlook for the world in 2021 could be a great deal brighter.
The effect on your money
UK markets already started November on a stronger footing as the British government and the Bank of England ramped up stimulus measures, along with the promising news of a Covid vaccine.
The marked further improvement in markets on this side of the Atlantic reflects the importance of US trade, and suggests that the mooted US-UK trade deal would be an ideal next step for UK recovery.
Even if this is forthcoming, there is still Brexit to deal with – but if there are the first glimmers of hope on the horizon, it may be time to reassess your current financial plans to ensure that you are ready for them.
It may be time to call us at Continuum, and see what changes you need to make to your own economic outlook.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to a suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
The value of investments can fall as well as rise and you may get back less than you invested.
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