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Biden Has Officially Won: What’s Next For Traders?

By Matthew WellerForexNov 08, 2020 12:11AM ET
www.investing.com/analysis/biden-has-officially-won--whats-next-for-traders-200543847
Biden Has Officially Won: What’s Next For Traders?
By Matthew Weller   |  Nov 08, 2020 12:11AM ET
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After one of the most contentious and acrimonious campaigns in history, the end is finally upon us.

While states like Georgia, Pennsylvania, Arizona, and Nevada are still putting the finishing touches on their vote counts (and President Trump is still threatening litigation over the ballots and recounts in several states), former Vice President Joe Biden has officially been declared the winner of the 2020 US Presidential Election by the AP, NBC, CBS, ABC, Fox News, and CNN.

Meanwhile, control of the Senate still hangs in the balance, with the Republicans likely to land on 50 Senators while the two Georgia races head to a special election on 5 January 2021 (note that we’re assuming a couple of unofficial results will go for Republicans, in-line with historical precedent). Assuming Biden takes the White House, Vice President Kamala Harris would cast the deciding vote in the event of a tie, so Democrats would need to win both of these races in the traditionally Republican state to “control” the Senate by the narrowest of margins. While it’s certainly possible Dems could win both, the market appears to be pricing in a split government (Democratic President, Republican Senate, Democratic House of Representatives) for at least the next two years.

What can we expect next from markets moving forward? As we’ve noted repeatedly, traders are a forward-looking bunch, so we can look at the moves we’ve seen since election night as a harbinger of the short-term trends to expect in the coming days and weeks:

Forex: Pauper Dollar?

When it comes to the FX market, “King Dollar” has been more “Pauper Dollar” this week. The greenback is by far the week’s weakest major currency, falling by more than 1% against all of its major rivals, and by over 3% against the resurgent Australian dollar. The buck is also probing its lowest level in nearly six years against the Swiss franc:

USD/CHF Daily Chart
USD/CHF Daily Chart

The cleanest narrative for this move is that, with COVID cases growing exponentially across the US and a split government likely, a massive $2-3T+ stimulus package is looking increasingly unlikely. If that view proves correct, the nascent US recovery could stall as we move through the winter, making other currencies with more responsive fiscal authorities and a better control of the virus more attractive.

Equities: More of the Same

Uninhibited, capitalism tends toward dominant oligopolies and monopolies. That’s exactly what we’ve seen over the past couple of years when a Republican President and Democratic-controlled House of Representatives were unable to unite against the technology behemoths that continue to gobble up market share. With another rough couple of months expected for “main street” brick-and-mortar businesses slowed by COVID-19, the FAAMG stocks may continue to gobble up market share and put their smaller rivals out of business.

This scenario would be bullish for tech-heavy, large-cap indices like the NASDAQ 100, especially at the expense of their smaller capitalization rivals like the Russell 2000, a trend that has been unstoppable over the last couple years already:

Nasdaq 100 Vs Russll 2000
Nasdaq 100 Vs Russll 2000

Commodities: Fed to Keep its Foot on the Accelerator?

Finally, tying together the comments above, the Federal Reserve will likely have to leave the monetary spigots wide open to account for an expected lack of action from US fiscal authorities. With asset purchases and near-zero percent interest rates likely to remain in place for years to come, commodities like gold and oil that are priced in the US dollar may see a tailwind under the expected US political regime. As we can see below, gold has already caught a bid this week and could soon make a run back toward the psychologically-significant $2000 level next.

Gold Daily Chart
Gold Daily Chart

Of course, there are many factors beyond just US politics influencing all of these global markets, so traders should continue to monitor the virus data, market trends, global geopolitical developments, and the prospects for fiscal/monetary policy in other countries as well. In fact, we’re looking forward to returning to a more “normal” environment that isn’t so focused on US politics in the days and weeks to come!

Original Post

Biden Has Officially Won: What’s Next For Traders?
 

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Biden Has Officially Won: What’s Next For Traders?

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Comments (8)
Testo Sterone
Testo Sterone Nov 08, 2020 5:08PM ET
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Many states will certify their results by beginning of December. Until then its all hearsay. Then the court cases. . .
Forex Harbingers
Forex Harbingers Nov 08, 2020 4:09PM ET
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Sorry, but with legal battles going forward in at least 5 states, this is far from over. Remember the Bush/Gore recount over one state took 36 days. Better strap in, this is going to be a bumpy ride
Joseph Huang qiao
Joseph Huang qiao Nov 08, 2020 3:22PM ET
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Oil price will down as quarantine policy coming soon
Sideways Dude
Sideways Dude Nov 08, 2020 6:04AM ET
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Biden hasn't officially won yet. The MSM have no power over the election process.
Samuel Hong
Samuel Hong Nov 08, 2020 3:44AM ET
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Investors will bet on China to win.
Warren Dexter
Warren Dexter Nov 08, 2020 2:36AM ET
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It is sad to see the Kool-aid going around the party. Biden is a Trojan horse, Kamala is the unassailable woman from the Progressive ****.. Oil is going to have a party... and the people are going to pay up. Free mortgages are all the rage, until the bank says they have no more money to give away, and Joe says he has a Plan for Government to do it... what could go wrong?
Harmony Anne
Harmony Anne Nov 08, 2020 1:39AM ET
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News agencies, most especially those with exceptional bias against the present incumbent, don't declare the winner of a presidential election. It's a legal process and until the mandatory recounts are completed and until the various legal challenges alleging electoral malfeasance are resolved in the courts, Biden has most certainly not officially won, whatever the cultural Marxist trolls and globalist peons in the media would have you believe.
Chris Scheer
Chris Scheer Nov 08, 2020 1:19AM ET
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It's time to do the right thing.We (the Senate) will respect, listen, and work with Joe Biden in the exact same way Nancy Pelosi and Chuck Schumer respected, listened, and worked with Donald Trump. Buckle up QuidProJoe.. You're going for a ride.P.S.. When you declared Trump was a racist, you declared half the country (including myself) was as well.Trump 2024 (Rocky II)
Dittharach Jindarak
Dittharach Jindarak Nov 08, 2020 1:19AM ET
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Go for it bro✌ Team Trump from Thailand
 
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