Despite swirling uncertainty over the outcome of the US elections, two points are clear: The Blue wave didn’t materialize, and a status quo policy environment looks increasingly likely. With votes still being counted in Arizona, Nevada, Michigan, Wisconsin, Pennsylvania, Georgia, and North Carolina, Trump and Biden both have a shot at the White House. But they will have to contend with a small majority could take until January to be decided.
In this report, you will learn:
- Markets appear to agree with our perspective that the outcome will produce much less definitive policy support, with the pre-election reflation trade being unwound.
- While our October baseline had assumed a Covid-19 fiscal relief package would be passed before the elections, our November baseline now assumes a $1.5tn stimulus bill will be passed in early 2021.
- In our new baseline, the Fed will keep rates at the effective lower bound at least through mid-2024, and we expect the current pace of QE (roughly $120bn per month) to continue until the Fed initiates interest rate lift-off.