Quite a week, no? As expected, my predictions about the election were wrong… and, perhaps more importantly, even anyone making a prediction about how the election returns were going to come out would have probably been wrong in guessing what might happen to the market in the wake of those results. I expected there to be a big drop before the election, as we arguably saw in recent weeks, and a strong relief rally after the counting was over and this national nightmare exercise in civic engagement finally ended, but that was largely because I thought the “blue wave” predicted by polls would come, and inspire investors to expect a massive stimulus bill, passed easily by a democratic majority. That didn’t come, and the race was too close to call on Wednesday, and yet the market soared higher… especially the tech stocks… and continued to climb on Thursday and, so far, today on Friday as we inch closer to what appears, absent some shock, to be a narrow victory for Vice President Biden.
So what does that mean?
I don’t know, sorry. Nobody else does, either, so we’re all guessing… but there are some reasonable guesses.
Plenty of folks are speculating that it’s mostly a sigh of relief that we got the scenario investors used to dream about, a divided government that won’t get anything big done (and therefore wouldn’t likely bring rapid tax hikes or shifts in federal spending, or new regulation). Maybe that’s true… maybe it’s the market foreseeing a narrow margin for the Republicans in the Senate and an eventual (surprise turnaround) reelection of President Trump that will mean “more of the same” on the deregulatory front… or just a four-year standoff between President Biden and Leader McConnell that embraces the status quo. That “status quo” for tax policy is the most popular reason for optimism I’ve heard from pundits, it strikes me that the white shoes and bulge bracket guys seem to love the idea of the republicans winning but Trump losing, but they don’t know any more than I do.
Or maybe it’s just that we’re getting closer to an answer, and everyone who is not a political pundit is so terribly, terribly sick of this election, and they’re just buying to celebrate the end of the campaign (don’t worry, the craziness will not go away anytime soon — Georgia is likely to have ...