How the Election Affects the Stock Market

By: Eli Itzhaky  |  November 25, 2020
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By Eli Itzhaky

Just like the presidential election, the stock market is full of surprises. In a week known for its historical volatility due to election uncertainty, with the addition of being in the midst of an ongoing pandemic, the market seemingly ignored all of this and had its best gains since April. Investors have spent months preparing different scenarios but no one could predict the crazy run that the market has been on for the past week, beginning the day after the election. With the questionable handling of the pandemic, or lack thereof, Donald Trump’s odds of reelection were slowly vanishing while Joe Biden was picking up steam amongst every major poll. Wall Street was betting on a “Blue Sweep”, meaning the Democrat party wins the presidency and picks up more seats in the senate, but the latter is looking less likely as votes are being counted. 

Even with most investors’ predictions being wrong, the market has still found something to be happy about. Since Republicans are the majority in the senate, they would likely block any tax raises that Biden might try to implement. It was reported before the election that Biden’s tax plan would force those making over $400k salary a year and living in big cities to pay over 60% in taxes. With that risk likely gone, investors generally feel a lot safer financially going forward. Although most investors would agree that Donald Trump has been great for the market, boosting the DOW and NASDAQ to record highs, they’d be happy that with a Republican majority senate, they’ll be able to keep more of their gains. 

During an already hectic week, there were other events as well that had impacts on the market. Senate Majority Leader Mitch McConnell said that another stimulus COVID-19 aid package will be passed very soon implying more money for consumers to spend and investors to invest. Almost parallel to the market, Bitcoin also surged last week to more than $15,000 a coin. Combine this with the fact that the Biden team announced on Monday that Pfizer’s vaccine is at 90% effective rate, bringing it one step closer to FDA approval. This had a very positive impact on the retail, travel, and vaccine industries. For example, stocks like Boeing, AMC and Inovio had large gains while “stay at home” stocks like Zoom, Peloton and Netflix took a plunge. In the past week, the Dow gained 6.2%, S&P 500 3.62% and NASDAQ went as high as 4% but has been dealing with recent selloffs, (making the index gain about 1% in the past week.) 

You can learn more about stocks and engage in discussion by being a part of the Yeshiva University Stock exchange (YUSE). It is an efficient way to stay up to date with market movement, chat with fellow students about trading, and grow your knowledge as an investor. Participants range anywhere between beginners and avid stock traders. The YUSE educates its members daily by sending helpful articles and learning tips into our group chat, enabling them to better understand how different events, like the election, COVID-19, and other worldly affairs have their effects on the stock market.

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Sources:

https://www.wsj.com/articles/u-s-stock-futures-drop-as-election-week-rally-pauses-11604659702

 

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