Markets Throw a Welcome Party of Sorts for Biden
Wall Street notched records, as relief settled in that
the election is over and Janet Yellen will be the Treasury secretary in the
next administration.
By Matt
Phillips
Nov. 24,
2020
A day after
the Trump administration effectively acknowledged the election of Joseph R.
Biden Jr., investors showed their relief by pushing the two major stock market
indexes to all-time records on Tuesday.
It was a
welcome party of sorts for Mr. Biden, but what investors were really embracing
was the end of uncertainty. President-elect Biden has vowed to push for more
stimulus to bolster the economy. His selection for Treasury secretary, Janet L.
Yellen, is well known from her days as Federal Reserve chair. And several new
coronavirus vaccine candidates mean that the pandemic could be under control in
the months ahead.
President
Trump, who on the campaign trail had warned that Mr. Biden’s election would
lead to stock market armageddon, on Tuesday implied that the day’s highs were
his own doing, making an unscheduled stop at a White House briefing to play up
the latest gains in the Dow Jones industrial average.
“The stock
market’s just broken 30,000 — never been broken, that number,” said Mr. Trump,
who has often used the markets as a barometer of his presidency. “That’s a
sacred number, 30,000; nobody thought they’d ever see it.” He added: “I just
want to congratulate all the people within the administration that worked so
hard. And most importantly, I want to congratulate the people of our country,
because there are no people like you.”
Mr. Trump,
who spoke for about 65 seconds, ignored questions from reporters about whether
he would concede to Mr. Biden.
On Wall
Street, the S&P 500 stock index rose 1.6 percent to a new high of 3,635.41,
while the Dow rose 1.5 percent, closing above 30,000 for the first time.
“We have an
enormous amount of certainty that we didn’t have just a few months ago,” said
Kristina Hooper, chief global market strategist at Invesco, an investment
management firm.
The last
few months have been a volatile stretch for investors. After hitting a peak on
Sept. 2, the S&P 500 began to fall, and — except for a brief uptick the
following month — remained roughly 9 percent below the peak until the end of
October.
One sign of
investor anxiety was the volatility displayed in the VIX, an index widely known
as Wall Street’s “fear gauge.” The VIX spiked by more than 50 percent in late
October as the virus picked up again and the election approached. A meltdown of
technology stocks added to the uncertainty. In the last week in October, stocks
fell 5.6 percent, the biggest weekly drop since March. Still, stocks were up
for the year at the end of last month.
And in the
weeks since the election stocks have climbed steadily, primarily because of
encouraging vaccine news. Pfizer, Moderna and AstraZeneca have all announced
that their vaccine candidates showed favorable results in trials. The S&P
500 has risen roughly 8 percent since the election. Some investors believe that
with Mr. Biden in the White House, and Republicans likely to retain control of
the Senate, they could count on political gridlock to block tax increases that
could roil the markets.
“You have a
Biden administration likely governed by a split Congress and a conservative
Supreme Court so it eliminates some of the most extreme policies either on the
right or left,” said Michael Arone, chief investment strategist at State Street
Global Advisors. “So markets are celebrating that.”
The good
news about vaccines has bolstered stocks that had been hit hard by the
outbreak. Stocks of airlines and oil companies have soared this month. United
Airlines, American Airlines and Delta Air Lines have all climbed by more than
30 percent. The oil giant Chevron is up nearly 38 percent. The Russell 2000 —
an index of smaller capitalization companies heavily influenced by the
shorter-term outlook for the U.S. economy — is up more than 20 percent this
month alone.
But many
analysts believe that the market could have done even better without the
political uncertainty about the outcome of the election. The president’s
baseless claims that there was fraud in the election and that he would
ultimately win a second term helped keep a lid on gains by injecting
uncertainty into the markets.
The
decision on Monday by Emily W. Murphy, the administrator of the General
Services Administration, to allow the presidential transition process to move
forward made investors feel confident that the election was finally over, Ms.
Hooper said. “I think that was creating a significant overhang and raised
questions about how long this would drag on,” she said.
Markets
also appeared to welcome the return of politics as usual under a future Biden
administration, and were reassured by the news that Ms. Yellen will be Mr.
Biden’s nominee to head the Treasury Department. She is a known quantity on
Wall Street, well respected for her steady leadership at the head of the
central bank, from 2014 to 2018.
“There had
been some fear that Mr. Biden would pick a Treasury secretary with a strong
anti-Wall Street bias,” wrote analysts with High Frequency Economics in a
client note on Tuesday. “Janet Yellen isn’t that.”
The markets
performed well under Mr. Trump for the most part. Since his election in 2016,
the S&P 500 has returned more than 80 percent — including dividend
payments. Most analysts credit the administration’s tax cuts — signed into law
in 2017 — for a significant part of the gains.
But the
last four years have also been a volatile period for markets, with multiple
sharp, sudden downturns often linked to policies pushed by Mr. Trump, such as
his trade war with China, which helped push stocks to a 6 percent loss in 2018.
This year,
the more than 11-year-old bull market collapsed in March, as the S&P 500
dove nearly 34 percent in a matter of weeks as the virus raged around the
globe, before eventually climbing to new highs.
Mr. Trump’s
style was often at odds with Wall Street’s preferences.
He broke
with the tradition of virtually all other recent presidents in using the power
of the bully pulpit to browbeat individual companies — including Boeing,
Amazon, Ford and General Motors — for decisions he disliked, often sending
their shares reeling in real time.
Even those
on Wall Street who might have supported some of the president’s policies often
said they could do without his constant Twitter missives weighing in on the
markets. (Since his election in 2016 the president has tweeted or retweeted
roughly 200 messages on the markets.)
“It always
bothered me that the president tweeted about the markets,” said Paul Schatz,
who manages roughly $90 million in assets for clients largely in New York,
Connecticut and Florida. “As an investment adviser in charge of taking care of
people’s money, I would rather the president would not wade into those waters.”
Michael Crowley contributed reporting.
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