While Donald Trump likes to say that if Biden is elected the economy will implode, Wall Street appears already betting on a Biden win with a much different outcome.
Traders are recently thinking about a “blue wave” in which Democrats also take control of the Senate, which would produce a $3 trillion stimulus to carry the U.S. past the coronavirus pandemic and into a more normal environment for the market.
Wall Street CEOs, traders and investment managers are now saying they would be fine with a change in the White House, one that reduces Trump noise, volatility of trade wars, and the continuation of government spending seen in recent years.
“The market is focusing on an end to the uncertainty around the Trump administration, and that in many respects is what underscores the pricing action around a possible Biden scenario and a blue wave,” said Joseph Brusuelas, chief economist at consulting firm RSM US. “Firms and investors crave stable expectations and that is how the Street is interpreting a likely Biden victory.”
This week’s drop on Wall Street reflects worry about the trajectory of the virus and the continuing effects on unemployment as winter looms over business activity.
“The market very much believes that Biden is going to win and the Senate is going to tip to Democrats,” said the CEO of one of the largest banks on Wall Street, speaking on the condition that he not be identified. “And the assumption is that we are going to have a very significant increase in stimulus very quickly and that’s very positive for markets. But the fact is there is still a tremendous amount of uncertainty around the outcome of the election and when stimulus might actually come, if it ever does.”
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