While Republicans are escalating their efforts to question the victory of Democratic President-elect Joe Biden, markets are cautiously optimistic about the future.
While investors have weighed the possibility of a potentially disorderly transition of power compared to what they have already weathered in 2020, some analysts believe that the potential legal challenges posed by outgoing President Donald Trump and his team are unlikely to endure.
Attention is now no longer focused on a possible election chaos, but on the possible outcomes of the Georgian Senate election campaign, which will take place in January.
Since the balance of power in the Senate is now almost balanced for Democrats and Republicans, the two runoff elections in Georgia could determine the Senate majority or a possible split in January.
“The threat of a serious constitutional crisis or what one might call a disorderly transition is seen as a tail risk for the markets. So it is not really a superficial and driving action,” Ranko Berich, Head of Market Analysis at Monex Europe, told Washington Newsday.
“Looking at most of the US institutions at this point, it doesn’t look like Trump’s challenges are likely to be successful at this point.
“Right now, the markets are trading with the reality of a Biden administration, mitigated by a possible Republican Senate.
Berich notes that we do not currently know how fiscal policy in the U.S. will develop because the composition of the Senate has not yet been decided, which in itself will increase the volatility of both currencies and stock markets.
Although Biden delivered a victory speech on Saturday night and several leaders around the world congratulated the Democrat on his victory, Trump has not yet admitted to the election. The Constitution does not require a candidate to give up an election, but Trump would be the first president not to do so.
Instead, Trump has since made groundless claims of widespread election fraud.
These messages have been taken up by his Republican counterparts. Yesterday, U.S. Attorney General William Barr authorized federal prosecutors to investigate allegations of voting irregularities, thereby circumventing the long-standing policy of the Justice Department that prohibits such actions before an election is confirmed.
“The more noise Trump makes, the more helpless he’s likely to be, because if he can’t undo Pennsylvania, it won’t matter in the end whether he’s talking about Georgia or Arizona,” Michael Hewson, chief market analyst at CMC Markets, told Washington Newsday.
“The biggest concern that investors have right now is that Trump might make life a little difficult. No more and no less than he has made life difficult for people in recent years”.
Hewson notes that the biggest change for the markets will probably be the prospect of a vaccine against COVID-19. This will in part determine the future fiscal course of any government because of the impact it could have on the economy.