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“Investors had begun to focus on the idea that the election would deliver a so-called ‘blue wave’, which not only sweeps Joe Biden to the White House but also delivers the Democrats a majority in the Senate and thus control of Congress. Should this materialise, the conventional wisdom is that it would pave the way for a large fiscal stimulus, which in turn would reflate the US economy. The conventional wisdom also holds that this would be positive for equity markets but negative for the dollar (since inflation expectations would also rise),” Neil Shearing of Capital Economics wrote on November 2 in a note.
“Maybe. But the experience of 2016 suggests that investors should be careful about taking strong positions on political outcomes and, worse, mechanically translating those to market outcomes. Back then, the consensus was that Trump was unlikely to win, but if he were to prevail then his rhetoric on trade and ‘carnage in America’ would spell disaster for equity markets. We all know what happened next,” he added.
China decoupling​. “Irrespective of who is in the White House, US-China decoupling is likely to continue over the coming years,” Shearing argued.
That’s true, but let’s not overlook how China would prefer “collaborative competition” with the US establishment rather than deal with a narcissistic maniac.
Capital also assesses that the Fed will continue to pursue policies that keep real rates in negative territory as the US economy continues its slow recovery from the pandemic shock, in which case equity markets should perform well under either a Biden or Trump administration over the coming years.
Also true, but that does not take into account the Trump effect on the latest money printing madness we’ve seen in recent years that has inflated US stock prices. It is just not done to say the emperor is naked or that the ​Fed​ has kowtowed to Trump. It ​may not see continued manipulation of stock prices as necessary under a Biden presidency​. Biden believes in institutions.
16​ TURKEY Country Report​ December 2020 ​ ​www.intellinews.com