Quick Take: Road to a Decision

With states still counting votes and legal action looming, the aftermath of Election Day has proven just as volatile as the run-up.

Thursday, November 5, 2020 | 10:00 am ET

Election Day usually brings certainty. That is not the case with the 2020 election.

As states continue to tally votes – 65 million of which came in through mail-in ballot due to the pandemic – the race between President Donald Trump and Democratic candidate Joe Biden is on a razor’s edge. It’s possible that the outcome will remain uncertain for several weeks; the Trump campaign said it has already filed lawsuits targeting the vote count in the key battleground states of Georgia, Michigan and Pennsylvania, and more legal action is possible.

“ This has become Election Week, not so much Election Day.”

In a Nov. 4 webcast, Leo Grohowski, Chief Investment Officer at BNY Mellon Wealth Management, and Dan Clifton, top-ranked Washington policy analyst and Head of Policy Research at institutional brokerage and advisory firm Strategas Research Partners, shared their views on the latest results and shed light on what the possible outcomes could mean for tax policy, COVID-19 stimulus and more.

Here are a few highlights:

1.

A divided government looks almost certain.

The results of the election suggest that a so-called “blue wave,” where Biden wins the presidency and the Democrats control both chambers of Congress, is no longer on the table. “If we had to point to one reason to why the market reacted so favorably [Wednesday], it was really the Senate result,” says Grohowski. Historically, the markets have performed most positively under a divided government.

2.

Biden’s sweeping tax hikes look less likely.

With Republicans maintaining control of the Senate and Democrats maintaining control of the House, the chance of aggressive tax increases under a Biden presidency is reduced. “If Mitch McConnell is going to run the Senate, the chances of tax increases are extraordinarily low. Not zero, but low,” says Clifton. “I think it’s an extremely low probability that high net worth investors, small business owners and shareholders of companies are going to have to worry about what their tax rate is going to be for 2021.”

3.

Fiscal stimulus is probable no matter who wins.

As the nation continues to battle the COVID-19 pandemic, lawmakers on both sides of the aisle are under pressure to produce a new stimulus package to support the economic recovery. While a potential package is likely going to be smaller than it would have been under a Democratic sweep, lawmakers are likely to get something passed soon. “My sense is there will be a valiant effort to try and get that done on a temporary budget that has to pass by mid-December,” says Clifton. “If that fails, you’re looking at early 2021 for some type of stimulus.”

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