US stocks soared today in North American markets, as investors capitalized on a close election that could result in a gridlock within Congress which would diminish the possibility of significant policy changes.
At the time of writing it is unclear whether Joe Biden or Donald Trump has won the Presidency. Currently, both are neck and neck in key swing states.
With votes being counted and the race becoming closer and closer, investors today gambled on the fading chances for Democrats to gain a big win in the U.S. Senate, thus lowering the possibility of higher antitrust scrutiny and a raise in capital gains taxes.
The reduced possibility of facing regulation provided a boost to health and tech firms. Notably, Facebook (NYSE: FB) stock increased over 7%, whilst a number of large health insurance firms posted double-digit increases.
The rise in stocks saw the Dow Jones rise 2.31%, the S&P 500 increase 2.97% and the Nasdaq surge 4.12%. The S&P healthcare index (SPXHC) leapt 5.6% to a record high, whilst the information technology sector (SPLRCT) jumped 4.3%.
Stock Volatility Ahead
The big gains made today follow a strong sell off yesterday and the heightened volatility looks like something investors will need to embrace before the dust eventually settles in the US.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown said on the situation:
“With Donald Trump already claiming victory even though millions of votes are still uncounted, investors may have to belt up and brace themselves for some volatile sessions of trading ahead,”
Meanwhile, Peter Kraus, founder of asset management firm Aperture Investments, said:
“What’s emerging for me is that not much is going to change as a result of this election, even if Biden wins,”
“The Senate is unlikely to flip. Stimulus bills, investments in infrastructure, significant fiscal spending and tax changes look in a rear view mirror.”
The next few days will be both vital and volatile for US stocks. The longer it drags on, the more uncertain investors will be and the markets more volatile. Whatever the result, the lack of Democrat control in the US Senate should benefit investors in the long run.
