Dubai: Although clarity emerged on the US presidential election, investors will look beyond the win by president-elect Joe Biden, and view if a divided government can slow post-pandemic progress for the top economy.
“Much of the president-elect’s agenda will be dead on arrival with the Republicans maintaining control of the Senate,” cautioned Paul Ashworth, Chief North America Economist at Capital Economics.
“But there is still a chance of more fiscal stimulus being passed, albeit probably not until after Biden takes office on January 20.”
After the majority of the US networks called it, Joe Biden declared victory as the next US president, taking over from current head of state and government Donald Trump, but the Democrat’s term won’t start till he takes office in January.
Markets digest Biden-win
Wall Street had taken a breather on Friday after powering through four straight days of gains in a week that was defined by an unsettled presidential election.
However, stocks ended last week strong after markets largely digested a Biden-win, while the monthly jobs report further underscored the hurdles still facing the economy amid COVID-19.
Meanwhile, Biden said he will meet with “a group of leading scientists and experts as transition advisors” on Monday to start plotting out plans and policies to fight the coronavirus.
“Our work begins with getting COVID under control,” Biden said Saturday night during his speech. “We cannot restore the economy…until we get it under control.”
Focus back on COVID, stimulus
On Friday, the US broke another pandemic record, reporting 132,700 new COVID-19 cases. The following day the country recorded another 126,100 new cases, which marked the fifth consecutive day of more than 1,000 deaths related to the coronavirus.
“More than 20 million are on unemployment. Millions are worried about making rent and putting food on the table,” Biden said Thursday. “Our economic plan will put a focus on a path to a strong recovery.”
Part of Biden’s vision includes more stimulus aid. As part of his campaign, he created the Emergency Action Plan to Save the Economy, a document that provides insight on the direction he may lean once he takes office.
The route to passing another stimulus package before and after the inauguration is projected to be rocky, contentious and extremely partisan.
More volatility ahead?
Analysts say that although markets haven’t displayed any knee-jerk reactions till now, that doesn’t mean that price action can’t get much choppier in the days and weeks to come.
Analyst bias largely remains bullish and investors are advised to take no action until any progress is made on another trillion-dollar economic cash injection plan.
“The focus for the markets for the days ahead is not the expected noise created by the Trump team, but how much the Republican party apparatus is enabling this noise,” Alex Neale, an analyst at brokerage ADSS.
“You would hope that decency would prevail and they would make it clear that this nonsense has to stop," Neale added. "But even then it is difficult to be confident that Trump would even listen.”
Major Gulf markets mixed
Trading on most GCC stock markets were a mixed bag on Sunday as investors weighed the implications of Joe Biden’s presidential win on the world’s largest economy.
Dubai’s main share index (DFM) gained 0.9 per cent, led by a 1.9 per cent increase in Emaar Properties. However, in Abu Dhabi, the index (ADX) lost 0.3 per cent, hurt by a 1.4 per cent fall in the country’s largest lender First Abu Dhabi Bank.
Elsewhere, the Gulf region’s largest bourse, Saudi Arabia’s Tadawul, rose 0.6 per cent in early trading, while the Qatari index (QSI) dropped 0.4 per cent, as most of the stocks were in negative territory.