Wall Street has been warming to the idea that a Joe Biden presidency would be bullish for stocks.
However, there are strings attached: His victory needs to be accompanied by a “blue wave” that sweeps Democrats into the majority of both the Senate and House of Representatives.
Those strings now look a bit frayed, as investors watch the probability of Democratic control of the Senate dwindle to that of a coin toss according to some metrics. And with it, so go the chances of a massive fiscal stimulus early next year that bulls were counting on to take stocks to new heights. The re-acceleration of Covid-19 cases in the U.S. and Europe underscores the renewed economic threat from the virus, with the S&P 500 plunging almost 6% in its worst week since March.
“There’s much more conviction around a Biden victory than a Democratic Senate -- that’s always been more of a jump ball,” said Alec Young, chief investment officer at Tactical Alpha LLC. “It’s all kind of murky. It’s safe to say no one really knows what’s going to happen in the Senate.”