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The Election, Covid-19, and Market Reaction Thumbnail

The Election, Covid-19, and Market Reaction

I don’t know about you but for me it seems like Election Day was a lifetime ago but it was only 10 days since we voted.  For me, what made it drag on so long was that it took 5 days until a projected winner was named.   The record number of mail in ballots in this election slowed down the counting of ballots so it took much longer to determine the winner than what we are normally accustomed to.

If you have never experienced a U.S. presidential election before it can seem very confusing.  The way we choose a President is unique in the world.   A winner is not determined by popular vote but by electoral votes and whoever receives 270 electoral votes is considered the winner.  But where did the number 270 come from?  Every state is given a certain number of electoral votes based on the number of representatives they have in the House of Representatives plus it's two senators.   There is a total of 538 electoral votes available.  To win the Presidency a candidate must win over 50% of the electoral vote which is 270.  Joe Biden reached that threshold on Saturday, November 7th and was therefore declared the winner.  

Traditionally, even though the election still has to go through the certification process, the candidate who loses the election would concede soon after a winner is determined so that a peaceful and orderly transition of the Executive Branch could begin.   Unfortunately, that has not happened in the election.  President Trump has not yet conceded and is contesting the results in the Courts.  These lawsuits have almost zero chance of succeeding as there is no evidence of systematic and widespread voter fraud.  So, when will this all end?  

According to election rules, all States must certify the outcome of the presidential election by December 8th.  This also means that any court challenges have to be settled by this date. (One purpose of the Trump lawsuits seems to be to sew enough doubt in the integrity of how voting was handled and therefore delay certification or even change how Electors will cast their vote.    Again, because there is no evidence of systematic voter fraud, the odds of this happening are close to zero.)  Once the election is certified, the Electoral College will convene and cast their ballots for President and Vice President on December 14th.  On December 23rd the President of the Senate (Vice President Mike Pence) will receive the electoral vote certificates and on January 6th the House and the Senate will convene to count the electoral votes.  The President of the Senate – Mike Pence presides over the process and announces the results.  The candidate that receives at least 270 votes will become the next president.   As of today, Joe Biden is projected to receive 306 electoral votes to Trump’s 232 electoral votes.  In prior elections, this process was a mere formality and ran relatively smoothly but this year is different.  I would expect that each step in the certification process will be contentious and polarized.  But, at the end of the day, Joe Biden will be inaugurated as the 46th President of the United States on January 20th, 2021.  At this point the presidential election process will finally be over!

What does the Markets think of all of this?  

Throughout the last 10 days, and in spite of the lawsuits brought on by the Trump campaign, the Markets have reacted favorably to the expected outcome with a Democrat in the White House and Republicans  strongly favored to maintain  control of the Senate (to be determined by run-off election in Georgia in January).  The S&P 500 surged over 200 points the day after the election and has continued to move in a positive direction.  Josh Barro of New York Magazine explained that the positive Market reaction was due to anticipation of an easing of trade tensions with China, no significant change in tax policy, and most importantly, steady leadership in the Executive Branch.   In summary, the Markets reward steadiness and certainty.  

While the Markets view the presidential election positively, it continues to exhibit volatility due to the on-going threat of the Coronavirus Pandemic.  The Markets reacted very positively to the news that the vaccine Pfizer is testing has proven 90% successful in its phase 3 trial. It also viewed President-Elect Biden’s announcement of a 13-member Covid-19 task force positively as a sign that a national strategy to combat the virus will soon be in place.

This Market positivity is being negatively offset by disturbing news that Covid-19 cases are once again skyrocketing.  The United States is the unenviable world leader in number of cases with over 10.7 million people who have tested positive for the virus.  New cases have topped over 100,000 for ten straight days and yesterday, November 12th, the U.S. reached a record level of reported of covid-19 cases at over 150,000.  Healthcare workers are stretched thin and lawmakers around the country are once again considering lockdowns and stricter restrictions to slow down the spread.  Unlike in March and April, there is no stimulus package to ease the burden of people impacted by the Coronavirus.  The increase in COVID-19 cases and a lack of government response may have a significant on the economy and the Markets.  

In summary, the Markets will continue to experience sharp highs and lows until Joe Biden takes office, a national strategy is implemented to fight Covid-19, and a vaccine is found.   Just today, the S&P 500 rose to a new record over news that Pfizer’s Covid-19 vaccine will prove to be successful.   But hold on to your seats.  The Markets can take a different direction as early as next Monday!


This content is developed from sources believed to be providing accurate information, and provided by Attune Financial Planning. The opinions expressed and material provided are for general information only.