2020 Elections: Why markets may now ditch Biden and cheer Trump

A nail-biter – It is already Wednesday on the West Coast and the US Presidential Election is too close to call. President Donald Trump outperformed the polls with a quick win in his new home state of Florida. He also secured Ohio, Texas, and Iowa. 

However, Democratic rival Joe Biden won Arizona, re-expanding his path to win the election. The president will likely win North Carolina and probably Georgia, but the election hinges on slow-counting Midwestern states – Pennsylvania, Michigan, and Wisconsin. 

Patience is a virtue now – officials in several states have gone to sleep and will resume counting later on. Moreover, mail-in ballots are still flowing in and are allowed to arrive late – up to Friday in Pennsylvania and by next Thursday in North Carolina.

The president poured cold water on markets by declaring "Frankly, I think we won" and claiming fraud. The battle could be extended from the ballots to the courts.

However, investors are focused on one thing – fiscal stimulus. A "blue wave" in which Dems win the White House and the Senate would secure a generous relief deal. While Biden has a good shot at becoming the 46th President, Dems have diminishing chances of winning the Senate. 

Republicans have won all the safe seats in the upper chamber, including those in Iowa, Montana, and South Carolina which seemed possible. While they lost Arizona, the GOP recaptured Alabama – as expected. A Democratic majority relies on North Carolina and on Maine – which seems to be fading away. 

If Republicans indeed hold onto the upper house, they could make Biden's life miserable. As Vice-President, the current candidate surely remembers the GOP obstruction after they won the House in 2010, and later the Senate in 2014. 

A Republican Senate would likely allow for a sub $1 trillion stimulus package. 

However, if Trump prevails, he would feel reinvigorated and could claim a mandate to force a generous package on his fellow Republicans – perhaps to the tune of $2 trillion. 

For markets, the second-best thing to a blue wave is a Trump win. That would be more favorable for stimulus than Biden at the White House without a unified government. 

More US elections: Bye-bye ‘blue wave’?