The post-election stockmarket is a “Labrador”, writes Ben Wright in The Daily Telegraph. Like the dog breed, it is proving “monomaniacally cheerful irrespective of circumstances”. Global markets had perked up in the days before the US election; polls suggested a Democratic blue wave would open the way for a $2.2trn stimulus package.
Yet when it became clear that Florida and Texas would not be painted blue, markets didn’t retreat. Instead, they decided that a Biden White House combined with a Republican Senate was what they had wanted all along. As the world waited for a final election call, the S&P 500 gained 7.3%, its best weekly performance since April.
A Biden White House with a Republican Senate is good news for US stocks, Andy LaPerriere of Cornerstone Macro told Barron’s. The Senate will block Democrat tax hikes on business, while a Biden administration should bring greater calm on the trade war front. The idea that divided government is good for equities is something of a Wall Street cliché. Yet there is little evidence for the idea that it is best when opposing parties are in Congress and the White House, says Paul Vigna in the Wall Street Journal. Since 1928 “there has been virtually no difference in the annual return of the S&P 500” between years with united and divided governments. If fact, stocks “slightly outperformed” when the executive and the legislature were in the same hands.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The almighty Fed
British stocks managed an even more impressively Panglossian feat, notes Philip Aldrick in The Times. The FTSE 100 gained more than 6% last week despite the small matter of England returning to a nationwide lockdown. In a world where fresh quantitative easing (QE)is always available, “bad news is no longer bad news… because policymakers won’t allow it”. In 2008 the banks were “too big to fail”, now that is true of the entire market. Central bankers won’t admit it openly, but there is a “price floor for assets… Call it market welfare for financiers”. The Federal Reserve last week agreed to keep interest rates at between 0% and 0.25% and continue its monthly purchases of $120bn-worth of bonds and mortgage-backed securities with printed money. The Fed’s balance sheet has soared from $4.1trn before the pandemic began to $7.1trn today, equivalent to 34% of 2019 US GDP.
Federal Reserve chairman Jerome Powell has done more than any politician to stabilise the markets this year, says Nicholas Jasinski in Barron’s. In the spring he slashed interest rates and launched unprecedented bond-buying programmes that stretched the Fed’s mandate to its limits. More could be in store next year. For investors, it is Jerome Powell, not Joe Biden, who is the man to watch in 2021.
-
RICS: Budget failed to boost property market and recovery unlikely until spring 2026Data from the Royal Institution of Chartered Surveyors suggests the Autumn Budget hasn't helped to improve property market sentiment
-
FCA launching targeted support to help savers with complex financial decisionsThe regulator wants to help you get to grips with investing and pension planning. Here’s how its new targeted support framework will help you
-
Leading European companies offer long-term growth prospectsOpinion Alexander Darwall, lead portfolio manager, European Opportunities Trust, picks three European companies where he'd put his money
-
How to harness the power of dividendsDividends went out of style in the pandemic. It’s great to see them back, says Rupert Hargreaves
-
Why Trustpilot is a stock to watch for exposure to the e-commerce marketTrustpilot has built a defensible position in one of the most critical areas of the internet: the infrastructure of trust, says Jamie Ward
-
Tetragon Financial: An exotic investment trust producing stellar returnsTetragon Financial has performed very well, but it won't appeal to most investors – there are clear reasons for the huge discount, says Rupert Hargreaves
-
How to capitalise on the pessimism around Britain's stock marketOpinion There was little in the Budget to prop up Britain's stock market, but opportunities are hiding in plain sight. Investors should take advantage while they can
-
London claims victory in the Brexit warsOpinion JPMorgan Chase's decision to build a new headquarters in London is a huge vote of confidence and a sign that the City will remain Europe's key financial hub
-
Reinventing the high street – how to invest in the retailers driving the changeThe high street brands that can make shopping and leisure an enjoyable experience will thrive, says Maryam Cockar
-
The consequences of the Autumn Budget – and what it means for the UK economyOpinion A directionless and floundering government has ducked the hard choices at the Autumn Budget, says Simon Wilson
