MUMBAI: As economies continue to battle the pandemic, equity investors are bracing for the crucial US elections currently underway. According to various media reports, Democratic candidate and Donald Trump’s rival, Joe Biden, is leading the race as of now. It should be noted that many opinion polls have predicted a decisive win for Biden.
But at this point in time, global equity investors are more focussed on the new stimulus package than the outcome of US polls. Expectations are that no matter who comes to power, another coronavirus relief package is a done deal. That said, the size of the fresh stimulus has been a bone of contention between the Republicans and the Democrats.
“The odds are high that we’ll see a sizable new fiscal stimulus package early next year, regardless of the election outcome,” Bob Doll, senior portfolio strategist, Nuveen Asset Management, had said in a note earlier this week. “If we see something sooner rather than later, it would likely be a smaller and more limited spending bill, such as the USD 500 billion package that Senate Republicans passed,” he added.
James Knightley, chief international economist at ING says, “Assuming the opinion polls are correct and Joe Biden wins a convincing victory with the Democrats retaining the House of Representatives and gaining control of the Senate this is likely to be the scenario that delivers the swiftest, most aggressive fiscal stimulus.”
“This is based on the $3.4 trillion stimulus proposed by House Democrats over the summer that would front-load support for household incomes and deliver relief for state and local government,” he said in his blog on 1 November.
The hopes for US stimulus are getting higher now that the European Central Bank (ECB) is likely to announce additional easing in December. A lockdown has been reimposed in many European countries in response to the rapidly increasing coronavirus caseloads. In the US as well, there are no signs of the pandemic pressure abating as infections continue to rise.
Not just the financial markets, even the International Monetary Fund has been rooting for more stimulus to boost global demand. So, any disappointment on that front could take its toll on the stock markets. On the other hand, positive developments relating to the vaccine would provide a fillip to investor sentiment.