November 4, 2020

US ELECTION: WANING ODDS OF A ‘BLUE SWEEP’ STIMULUS

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In Short

Polls proved wrong again and the presidential election looks very tight. It will be decided over the next few days, with the risk of a protracted and bitter legal fight looming large. Failure by the Democrats to take the Senate would greatly reduce the odds of a sizeable fiscal stimulus (US$ 2tn or more). However, a smaller size package (up to US$ 1tn) remains feasible under a split Congress.
US ELECTION: WANING ODDS OF A ‘BLUE SWEEP’ STIMULUS
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Highlights:

  • Polls proved wrong again and the presidential election looks very tight. It will be decided over the next few days, with the risk of a protracted and bitter legal fight looming large.
  • Failure by the Democrats to take the Senate would greatly reduce the odds of a sizeable fiscal stimulus (US$ 2tn or more). However, a smaller size package (up to US$ 1tn) remains feasible under a split Congress. Conversely, any regulatory tightening and tax increase would look much less likely, with a Republican Senate. 
  • The surprising result triggered an initial risk off-mode on markets, as bets on the fiscal boots following a “blue wave” were reversed. Prices are recovering on European markets. While another fiscal stimulus and brightening prospects about a Covid-19 vaccine may ultimately help to underpin risk sentiment, the risk of a drawn-out legal battle may cast a shadow over the prospects of financial markets over the next days, if not weeks.

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US ELECTION: WANING ODDS OF A ‘BLUE SWEEP’ STIMULUS
November 4th, 2020

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