(CBS Detroit) — Election day is here, and the stock market is reacting positively. The Dow Jones climbed almost 650 points (2.4 percent) on Tuesday morning. The S&P 500 was trading 2.3 percent higher, and the NASDAQ, which is more technology-oriented, had moved up 2.1 percent. Markets around the world have shown similarly positive results. Each index settled some by the end of the afternoon but finished the day well above where it opened.
What does this stock market reaction mean in light of the 2020 election?
Investors like certainty. So they are likely betting that the presidential election will yield an obvious winner. That could be current President Donald Trump or former Vice President Joe Biden. Since stocks generally move upward, regardless of the party in power, the actual winner is less important. Likewise, the outcome could become apparent tonight or take a few days, as states count all their ballots. As polls opened this morning, over 100 million Americans had already cast a vote. The surge in early voting amounts to over 70 percent of all the votes cast four years ago.
Investors are afraid of a protracted and contested sorting-out process, one that adds uncertainty to the market in these already uncertain times.
Another aspect of the stock market’s positive reaction is the status of a second stimulus package. The election could help determine when such a package could pass and what form it will take.
If Biden wins, and the Democrats take over the Senate, a second round of stimulus would likely be larger. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin, had recently been negotiating a package somewhere in the range of $1.8 and $2.2 trillion. It includes a second stimulus check and additional weekly unemployment benefits from the federal government. Pelosi’s framework evolved from the $3 trillion HEROES Act, which the House passed back in May, but the Senate did not take it up before the election. Pelosi has recently said, should Biden win, “we want to have as clean a slate as possible going into January.”
If Trump wins, and the Senate remains in Republican hands, any stimulus package would likely be smaller. The Senate’s latest attempt at stimulus amounted to $500 billion and did not include stimulus checks. It failed a few weeks ago to pass the Senate with a filibuster-proof majority. Trump supported a larger package before the election and has recently promised “a tremendous stimulus package immediately after the election.”
Each of these scenarios assumes the House of Representatives remains under Democratic control. But with every Representative up for reelection, it’s theoretically possible that the House changes over to the Republicans. It is unlikely, however. The Democrats occupy 233 seats, and the Republicans 201. So a shift in power would mean a net change of 17 seats, which generally doesn’t happen.
The outcome of the election will determine when a second stimulus package is reconsidered. That could be in the lame-duck session that starts November 4 and runs through January 3 or after the presidential inauguration on January 20. However, Pelosi and Senate Majority leader Mitch McConnell have both recently suggested that additional federal aid will probably have to wait until the new year.
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