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The US election created a ‘goldilocks scenario’ for financial markets

  • November 06 2020
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The US election created a ‘goldilocks scenario’ for financial markets

By Cameron Micallef
November 06 2020

As the votes continue and the results are collated, the US election is increasingly likely to create a “goldilocks scenario”, an industry expert has said.

The US election created a ‘goldilocks scenario’ for financial markets

The US election created a ‘goldilocks scenario’ for financial markets

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  • November 06 2020
  • Share

As the votes continue and the results are collated, the US election is increasingly likely to create a “goldilocks scenario”, an industry expert has said.

The US election created a ‘goldilocks scenario’ for financial markets

T. Rowe Price’s head of Australian equities and portfolio manager, Randal Jenneke, said that if Biden wins with the Republicans controlling the Senate, it would create a goldilocks scenario where tax changes that could hurt company profits do not occur while the Fed provides support for markets.

“The market over recent weeks appeared to be positioning for a ‘Blue Wave’, which carried the prospect of a much larger stimulus package which could have exceeded US$5 trillion,” Mr Jenneke said.

“With a Blue Wave scenario all but removed, it is very unlikely Democrats will be able to raise US corporate and income taxes for higher-income earners and pursue the more controversial aspects of their progressive agenda.”

With a split congress, T. Rowe Price expects a split congress would result in lower stimulus and continued outperformance of growth.

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“Ultimately this means more of the same,” Mr Jenneke said.

“A divided government will constrain stimulus and tax hikes; we expect this to continue to favour growth stocks and the market heavily traded this way overnight with the NASDAQ rising close to 4 per cent and traditional growth sectors of healthcare, IT, consumer discretionary all rising.”

The US election created a ‘goldilocks scenario’ for financial markets
The US election created a ‘goldilocks scenario’ for financial markets
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About the author

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Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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