Bidens post-election stock market bump is easily beating Trumps

Biden's post-election stock market bump is easily beating Trump's

The Biden era is off to a roaring start on Wall Street, even surpassing the euphoria following President Donald Trump's upset victory in 2016.

The S&P 500 has surged 10% since Election Day to all-time highs. That nearly doubles the 5.5% rally during the same post-election period in 2016.
The Senate races in Georgia will shape the economic recovery
The Senate races in Georgia will shape the economic recovery
The Nasdaq, lifted by high-flying tech stocks including Amazon (AMZN) and Zoom (ZM), is up a stunning 15% since November 3. That almost triples the Nasdaq's 5% post-election bump of four years ago.
Those are impressive returns, especially considering Trump repeatedly warned stocks would "crash" if Americans failed to reelect him. That has hardly been the case, at least so far.
Even though President-elect Joe Biden might have (very) early bragging rights, Wall Street's post-election celebration is not solely -- or even primarily -- about Biden's victory. Instead, the gains are being driven both by a sense of relief that nightmare election scenarios were avoided and, perhaps most importantly, that vaccines will hopefully help end the pandemic.
"Certainly, there were a lot of concerns prior to the election that it could lead to social and political unrest," said Ed Yardeni, president of investment advisory firm Yardeni Research. "There have been no riots in the streets. The market focused on the fact that the constitutional system still works."
Goldilocks for stocks
Investors are also relieved that neither party will have free reign to impose sweeping new policies in 2021. The "blue wave" didn't materialize and Republicans unexpectedly gained seats in the House of Representatives.
Unless Democrats sweep both January runoffs in Georgia, the GOP will retain control of the Senate. Even if Democrats win those Georgia races, they will hardly have a supermajority, although with a 50/50 split, Vice President-elect Kamala Harris would cast the deciding vote to break any deadlocks.
"All of this suggests that the more extreme ideas, on the left or the right, won't become law. That's being celebrated," said Michael Arone, chief investment strategist at State Street Global Advisors.
Joe Biden's financial team could create a giant stock bubble
Joe Biden's financial team could create a giant stock bubble
For instance, Democrats will have little shot at sharply raising taxes on corporations or the wealthy. Biden's sweeping climate legislation is very likely to be blocked by Republicans. Only infrastructure stands a chance of breaking through the gridlock.
Trump bashed Biden during the campaign as "Sleepy Joe," but many investors wouldn't mind a break from the chaos and unpredictability of the Trump era. The latest example occurred Tuesday night when Trump shocked even his allies by threatening to block the bipartisan $900 billion relief package.
"For investors, this is somewhat the best of both worlds," Arone said of the election outcome. "You get a more predictable foreign and trade policy while your domestic policy doesn't seem as progressive as some of the worst fears."
Vaccines to the rescue
The post-election rally kicked into high gear after Pfizer (PFE) and BioNTech (BNTX) announced November 9 that their vaccine is highly effective against Covid-19. Moderna (MRNA) followed suit with a similar announcement a week later. Both vaccines have since received emergency-use authorization from the FDA.
"It gave investors confidence that there is a light at the end of the tunnel," Arone said.
That's why Wall Street has largely looked past skyrocketing Covid-19 cases, hospitalizations and deaths.
Not all markets are outpacing their post-election performance of 2016. For instance, the Dow's 10% leap since Election Day is only narrowly ahead of its 9% gain during the same period of 2016.
The Fed factor
Of course, the economic world is very different today than it was four years ago.
Back then, the recovery from the Great Recession was showing signs of old age. Investors believe this recovery is just getting started -- and they don't want to miss out on the market gains (especially if they did last time).
"The central question in 2016 was: How do you keep the recovery going?" said Nicholas Colas, co-founder of DataTrek Research. "The question now is what kind of recovery will there be from the worst recession since the Great Depression."
This billionaire warns that America's massive wealth gap could lead to conflict
This billionaire warns that America's massive wealth gap could lead to conflict
And unlike in 2016, the Federal Reserve is not itching to lift interest rates out of the basement anytime soon. In June, Fed Chairman Jerome Powell said: "We're not even thinking about thinking about raising rates."
More recently, the Fed promised to keep its foot on the stimulus pedal. At its December meeting, the central bank pledged to keep buying bonds "by at least" the same pace until more progress is made in repairing the economy.

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