After a nervous October, stock markets enjoyed a very robust election week rally and then soared early this week when Pfizer and BioNTech announced impressive preliminary results on their COVID vaccine. Wall Street expects Joe Biden will become our 46th president while the Republicans maintain their control of the U.S. Senate. The resulting divided government should result in significantly fewer policy changes regarding taxes and business regulation than would have been the case had the Democrats swept last week’s election. The financial markets reacted to this outcome positively, as they usually enjoy the predictability of “gridlock” in Washington D.C.
Given the long relationship Senate Majority Leader Mitch McConnell has with Joe Biden, it is possible we could even see some legislative bipartisan progress on issues such as infrastructure spending. Additionally, last week our central bank reaffirmed their commitment to keep interest rates low for the foreseeable future, which should provide an ongoing tailwind for equity investments.
With the United States continuing to report record numbers of COVID cases, we expect the pandemic will worsen heading into the winter months. However, if progress on the vaccine front continues, the financial markets will likely anticipate COVID becoming manageable in 2021. This should lead to increased optimism that a healthy recovery will follow for both the U.S. and global economies.
On this Veterans Day Week, the Pacific Wealth Management team is especially thankful and appreciative of the sacrifices so many men and women in our armed services have made to protect our beloved country and the unparalleled freedoms we sometimes take for granted.
Please keep yourself and family safe, while remaining vigilant in the months ahead.