As suggested in our pre-election “what if” commentary, a split government is a net positive for the stock market. It appears that the election of the Bidan/Harris ticket was more of a repudiation of extreme behavior on the part of Donald Trump than an endorsement of a strong shift to the left in overall U.S. politics, Democrats appear shocked to have lost seats in the House of Representatives and of an apparent failure to win control of the Senate. What this seems to mean is the following:
- Greater predictability coming from the White House.
- Little chance of major tax increases on either corporations or individuals.
- Continued deterioration in the solvency of Social Security and Medicare trust funds.
- A smaller Corona Virus stimulus package, perhaps staving off a further downgrade in investor opinions of the solvency of the federal government.
- Unlikely to see expansion of Affordable Care Act, perhaps its demise.
- Continued shift in the Federal court system to the right, which is likely a pro-capitalist event.
- Continued acrimony in D.C., although Joe Biden’s possible ability to “work across the aisle” may lead to some much needed infrastructure spending.
- Risk of more overt military involvement for USA (a pillar of the Trump presidency was to avoid more foreign entanglements.)
- Less chance of muzzling or breaking up Big Tech due to inability of Congress to agree to that (or much of anything, for that matter.)
- Little meaningful moves to control drug and healthcare costs.
Whether you are pleased or dismayed or confused by apparent election results, “the market” has voted thumbs up on the result. Wealthy investors, Rejoice!