A Biden-Harris sweep is best for economy, says Fidelity International

By: Trademagazin Date: 2020. 11. 24. 10:10

A sweeping victory for Joe Biden and Kamala Harris in November’s US election plus Democratic majorities in both houses of Congress would be the best outcome for the US economy in the long run — though investors might take fright in the first few weeks.

That’s the take of Fidelity International, the sister company of Fidelity Investments, and its lead cross-asset strategist Wen-Wen Lindroth, published in a note on 13 August after Biden picked Harris as his running mate.

Meanwhile, Schroders, one of the UK’s biggest fund managers, said markets are not yet pricing in a Biden victory — but they should.

Lindroth said that if the Democrats take charge of both executive and legislature, the US government would be more likely to spend big to bail the economy out of its Covid-19 slump. She pointed out that Biden’s spending pledges already total $4.8tn.

While that prospect might rattle investors at first, Lindroth said, they would soon adjust.

“While markets may initially baulk at a Democratic sweep due to the party’s association with higher taxes and more regulation,” she wrote, “we think investors would eventually start to price-in the effects of a combination of greater fiscal largesse and monetary expansion, which should ultimately lead to higher consumer confidence and support for risk assets [an investor’s term for high-returning assets like stocks].”