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LGT Navigator: No “blue wave“and the race is close

November 4, 2020

With a so-called “blue wave“ the Democrats had hoped to secure not only the presidency but also power in both houses of parliament. As of 07:00 (CEST) this does not seem to work out that way. President Trump is doing much better than the polls predicted and seems to have won the important swing states Florida and Ohio. There is hope for the Democratic challenger Biden especially in Arizona. The race is not yet decided, but it is clear how deep the rift is in the US. Should it take a long time, possibly days or weeks, until an effective winner is determined or the parties do not acknowledge and legally challenge a possibly narrow defeat, this could lead to high uncertainty, nervousness and volatility on the financial markets.

America has voted and remains deeply divided

No clear result is expected after the polls close in the US. Both camps can still hope, but it can be anticipated that the landslide victory hoped for by the Democrats will not materialize. Although (as of 07:00 CEST) the Democratic challenger Joe Biden can (according to the preliminary results) win the important state of Arizona, US President Donald Trump seems to win the swing states Florida and Ohio. The state of Pennsylvania could now be decisive. But since the processing could only be started on election day, the counting of postal votes might take a long time. According to initial indications, Trump is also ahead in Pennsylvania.

The race for the Senate also remains tight and open at the moment. Current status: 45 for the Republicans and 44 seats for the Democrats (majority from 50). In the House of Representatives, the current state of affairs is: 156 for the Democrats and 155 for the Republicans (majority from 218).

Record voter turnout does not seem to give Democrats a real advantage

Bloomberg estimates that between 142 million and 165 million votes were cast in this election, which is a new record. In view of the corona pandemic, around 100 million Americans have already used their voting rights in advance of the election date, either by letter or in pre-opened polling stations. This corresponds to more than 70 % of the total turnout at the last election in 2016. According to surveys and expert opinions, the Democrats in particular should benefit from the high turnout. According to initial findings, this expectation does not seem to materialize.

Initial market reactions are positive

On the Asian stock exchanges and the futures markets, the initial reactions are positive, despite the fact that the initial situation remains unclear. Looking at the short-term development of US government bond yields and technology stocks, the markets currently seem to anticipate a victory for President Trump. In Tokyo, the Nikkei Index, which comprises 225 stocks, is trading around +2% higher, while no clear trend is apparent on China's stock exchanges.



Economic Indicators November 4

MEZ Country Indicator Last
ca. 05:00 US Earliest that the media can declare if there is a President-elect.
09:15 SP IHS Markit Composite PMI (October, final) 44.3
09:45 IT IHS Markit Composite PMI (October, final) 50.4
09:50 FR IHS Markit Composite PMI (October, final) 47.3
09:55 GE IHS Markit Composite PMI (October, final) 54.5
10:00 EZ IHS Markit Composite PMI (October, final) 49.4
10:30 UK IHS Markit Composite PMI (October, final) 52.9
14:15 US ADP Employment private sector (October) +749,000
14:30 US Trade Balance (September) -USD 67.1bn
15:45 US IHS Markit Composite PMI (October, final) 55.5
16:00 US ISM Non-Manufacturing PMI (October) 57.8

Earnings Calendar November 4

Country Corporate Period
NL Ahold Q3


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Source: LGT Bank (Switzerland) Ltd.

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