After a few days of uncertainty, the situation around the US elections has become clearer. Joe Biden is expected to become the new US President. The states will not have to appoint their electoral staff until 8 December, and the current president Donald Trump is using legal means to defend himself against defeat. But the election results are now clear enough, so that the change of power cannot be stopped by legal means. Moreover, the Republicans as a party can be satisfied with the overall outcome of the elections. Even the by-elections for the last open senatorial posts, which are scheduled for early January, will hardly result in a majority of Democrats in the Senate. Joe Biden will therefore find it difficult to carry through his election programme, for example with regard to tax increases.
The elections have once again shown how divided American society is. At the same time, the economic outlook remains bleak because of the Corona pandemic, and hopes of effective vaccination are not likely to change that for the time being. Meanwhile, the stimulus package to support the economy has led to a further sharp rise in the fiscal deficit, and the US is increasingly only able to finance its debt through its own central bank. For all these reasons, there is no doubt that the challenges facing the US in the coming years remain considerable.
In the short term, however, the uncertainties have now been significantly reduced by the clearer results of the elections. The economy and financial markets can continue to count on the support of the central bank. This is why we closed the tactical underweight in US equities this week in the portfolios we manage.
In our monthly Investment Compass at the end of next week, we will take a closer look at developments in the global economy, the current situation on the financial markets and the positioning of our portfolios.
