Johannesburg, 16 November 2020: Following the controversial outcome of the US election in November, Daniel Kibel, Co-Founder of CM Trading, speculates on its economic effects.
“What a year it’s been. We’ve had a global pandemic, mass unemployment and a US election that was a spectacle to follow. Following Biden’s win, the markets were on the up. But I am not convinced that Biden was the primary reason for the upturn.
“There was speculation before the election that a contested or uncertain result would cause uncertainty in the markets. The reality is, though, no one is currently taking Trump’s outlandish claims of election fraud seriously, apart from his supporters. Even Fox News has distanced itself from him. Market instability only comes when there is uncertainty. And the markets, it seems, have just had enough of Trump’s erratic behaviour.
“There simply was no election fraud as Trump claims. The President has been sewing these seeds for months – if not years. Big business knows it and everyone else knows it as well. Unless Trump suddenly comes along with decisive evidence that the election was tampered with, the markets are turning a blind eye to him.
The Senate and big business
“The most important market in the world is the US. When the American markets go up, everything else is dragged up with them and over the last week, performance has been very good. This could well be a result of the announcement about Pfizer’s COVID vaccination, which is said to be 90% effective, rather than Biden’s victory.
“There was a lot of expectation that the Democrats would flip the Senate, giving Biden more control in terms of passing legislation. That didn’t happen. The concern was that, should Biden win Senate, a more left wing agenda could hurt big business. Corporations don’t adapt well to changes that spread their wealth more thinly and Biden is seen as a steadying hand that would try to enable that. But with the Republicans maintaining Senate control, the democrats could be met with resistance in terms of passing legislation.
“That said, Biden’s pro-environmental policies may still spell trouble for some businesses. Biden will almost certainly go back into the Paris Agreement on Climate Change and taxes may be increased, though that is likely to be watered down by the Democrat’s lack of success in the Senate.
What may come?
“What may happen in the markets over the coming months is hugely speculative at this point. The American trade war on China is likely to continue – if slightly less aggressively. Biden will face challenges in the Senate and will push hard on his more liberal and pro-environmental policies but the Republicans will push back.
“On one level, the elections have passed and we also have the good news about the COVID vaccination. But the world is still in the middle of a massive recession. Now that a vaccination seems to be on the horizon, there’s a chance things will go back to ‘normal’. This could potentially give the markets a big boost. On the other hand, a third of the people in the world have lost their jobs. That’s going to have an effect on global economies, no matter how you look at it. And I’m sceptical that the markets will continue to rise.
“It’s an exciting time to be trading on the markets. Periods of great change always are. When volatility arises, it can be the best time to trade – but also the most risky. The COVID vaccine is set to change the game – possibly even as soon as the end of the year. But there is a lot of ground to cover globally in terms of economic recovery. The ‘normal’ we once knew is a thing of the past. But as a new face gets ready to occupy the White House, a new status quo will be established and global markets will continue to reflect what that new norm will be in America.”
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