Spreadex Market Update

Markets reverts to rebound mode as US election remains on a knife-edge



It appears that once again investors are buying into a Joe Biden presidency, despite the race – which could still have days left in it yet – being on a knife-edge.

Overcoming the hesitancy suggested by the futures this morning, the Dow Jones built on yesterday’s supersized rebound, adding another 550 points after the bell. That puts the index back above 28,000 for the first time in a week and a half.

Investors seem to be taking a kind of win-win attitude to the election. Yesterday’s growth was based on the hopes of a blue wave-led stimulus package. Now that the race is much tighter, and the Democrats have little chance of taking the Senate, the markets are celebrating the likelihood of preserved tax cuts and no healthcare reform.

There are also slim signs that Biden is going to win. Wisconsin, Michigan and Nevada all have the Democrat narrowly leading, while Pennsylvania – which may or may not be this year’s deal-breaker – has plenty of potentially blue votes left to count.

It’s certainly a bold reaction to what could be the most drawn out election since Gore versus Bush in 2000, and one that suggests investors are ready to find any excuse to escape the covid-hole they found themselves in at the end of October.

Following in the footsteps of the US, Europe decided, hell with it, we’re rallying too! The FTSE hit 5870 thanks to a 1.6% increase, with the DAX and CAC climbing 1.9% and 2.2% respectively – that compares to some 1%-plus losses seen at the very start of the day.

There is still potentially a long road ahead until we have a definitive answer regarding the next President of the United States, one that could include recounts and legal challenges. And just like yesterday, the markets may be setting themselves up for a fall with their giddy gains this Wednesday.

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