Worst-Case Scenario Off The Table? Market Experts React To Election Results

The SPDR S&P 500 ETF Trust SPY ripped higher by 3.2% on Wednesday as many swing states continue to count election votes. The election is shaping up to be one of the closest in history, and several analysts and experts have weighed in on what that could mean for investors in the days and weeks following Election Day.

Near-Term Stimulus Risk: Bank of America economist Ethan Harris said the fact that a Democratic blue wave seems unlikely at this point has reduced the chances of a large fiscal stimulus package.

“In our view, Senate Republicans are likely to be much more [fiscally] conservative if their party does not control the White House as they resist rather [than] accept the will of the President,” Harris said.

Harris said the next fiscal stimulus package may now be substantially smaller if it ever even gets passed at all.

Nigel Green, chief executive and founder of deVere Group, said the political uncertainty in coming days and weeks will likely be good news for bitcoin.

“What we do know is that delays, legal challenges and a potentially explosive constitutional crisis in the world’s largest economy is likely to give Bitcoin a meaningful price boost,” Green said

In addition to bitcoin, Green said the SPDR Gold Trust GLD and other safe-haven assets not tied to specific countries would also likely see price increases in the near-term.

Related Link: Should You Invest In Gold Right Now?

Long-Term Upside Ahead: Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, said a Joe Biden victory coupled with a Republican Senate would be bad news for the economy in the near-term but potentially good news over the next several years.

“Ultimately, a Republican Senate and a Biden presidency is still possible and although that was considered one of the worst results (assuming the House remained in Democratic control) it may be best for markets over the next 2-3 years (e.g. some gridlock and impediment to tax increases) even if it causes the most discomfort for markets over the next 2-3 months (e.g. because of a lack of significant stimulus),” Zacharelli said.

At the same time, a Donald Trump victory coupled with a Republican Senate could also be good news in the long-term as long as investors avoid the near-term unwinding of “blue wave” stocks.

Mizuho U.S. chief economist Steven Ricciuto said it appears likely that one party will not control the White House and both houses of Congress, which takes the most controversial policy initiatives for both parties off the table.

“As such, the election has not altered our view that we will end 2021 with the S&P in the 3800-4000 area that the 10-year note will grind toward 1% by the end of this year and 1.75% by December 30 2021,” Ricciuto said.

Mizuho’s year-end S&P 500 target of around 3,900 represents about 12.3% market upside over the next 14 months.