After around four days of uncertainty as US states tallied the votes, Joe Biden is now more or less the presumptive winner of the presidency, with Donald Trump scheduled to become the first one-term president since the 1990s.
As of Monday morning, Biden is projected to have secured 290 electoral college votes, well over the 270 required for a majority, with Trump trailing at 214. While North Carolina and Georgia are the only states yet to be called, there is no longer a way for the incumbent president to achieve a majority through undeclared states alone.
However, the Trump campaign shows no signs of conceding, with the president’s team having filed a litany of legal challenges across multiple states in order to either stop counting votes, keep counting votes, or invalidating ballots depending on which state is concerned. However, most analysts agree that most of these complaints have little to no merit, and the chance of proving enough voting irregularities to flip multiple states back to the Republican side is so small as to be considered impossible.
Recounts are also scheduled to begin in both Georgia and Wisconsin due to the narrow margin of victory, however even these are considered large enough to prevent any possibility of the result changing. In the contested 2000 election, the margin between George W Bush and Al Gore was 537 votes, by contrast, Biden’s lead in Georgia currently stands at just under 10,000 votes.
With this in mind, markets are proceeding with Biden as the incoming president ahead of his inauguration in January, however, a better than expected election night for Republicans further down the ballot, with the GOP potentially retaining control of the Senate, means the president-elect with a number of obstacles to his agenda before he even enters the White House, which in turn will have repercussions for multiple sectors.
COVID vaccine and stimulus likely to be near-term focus
In a note on Monday, analysts at UBS retained a “pro-risk stance” and they expected market focus to shift to medium-term drivers of economic growth such as coronavirus vaccine developments and stimulus measures, which they expected to support equity markets.
“We acknowledge that the move higher in the past week has increased valuations, in the US in particular, but believe that the next leg higher for equities will be driven by more economically sensitive parts of the market, such as mid-caps, industrials, and other select cyclicals “catching up” with the secular growth names”, the bank said.
Keep an eye on green tech, healthcare
UBS also said that Biden’s election could also bode well for the green technology sector, with the president-elect having “made an important directional signal about beliefs and values by saying that the US will once again support the Paris [Climate] Agreement on reducing greenhouse gas emissions”.
“State-level and corporate policies should also remain supportive. And, in any case, the economics are increasingly speaking in favour of greentech. In many cases, solar PV and onshore wind are now already the cheapest sources of new-build power generation, and it is worth noting that the largest renewable power developer in the US is now the country’s largest “energy” company by market capitalization, even without additional federal regulatory support”, the bank said.
This view was echoed by analysts at Goldman Sachs, who said a “US Green Revolution” could increase American spending on renewable energy systems (RES) by up for four times and could also surpass the value of the European Union’s Green Deal, which they estimated at between €7-9 trillion.
Meanwhile, UBS also said that the likelihood of a split Congress with a GOP controlled Senate was “the best near-term outcome” for healthcare stocks, as “more aggressive Democratic policies on drug pricing and a public option for health insurance” are unlikely to pass through Congress.
“Moderate drug pricing legislation remains possible and would enhance clarity, but the probability of a bipartisan compromise on any health policy legislation is below 50%”, the bank added.
Big Tech unlikely to face regulatory pressure with dividend Congress
Elsewhere, worries over whether the US tech giants could face renewed regulatory pressure have been lessened by the likelihood of a divided Congress, with a Republican-controlled Senate likely to stall any substantive efforts to reform the likes of Apple Inc (NASDAQ:AAPL), Google parent Alphabet Inc (NASDAQ:GOOG) and Facebook Inc (NASDAQ:FB).
“Investors are increasingly confident that it will be much harder for the Democrats to push through legislation aimed at tougher regulation of the tech giants”, said Susannah Streeter at Hargreaves Lansdown.
However, Streeter cautioned that Biden’s record of working with Republicans across the aisle could help remove more immediate concerns around issues such as the budget, meaning the focus could “switch back to big tech ethics and just how much power the giants should wield”.