The World In A Week 84 – Hello Mr Blue Sky

It looks like it is finally over, as it would appear that the Democrats, with Joe Biden, have taken control of the US Presidency. The control of the Senate, however, is still in question, as it looks as though the Republicans may have retained control. The blue wave that was predicted by the polls may not have come in, but it is clear the US is extremely politically polarised.

What does that mean for markets? We would consider Trump’s strategy of continued court challenges to have little or no effect on stock markets. Immediate concerns though will be the content of the next fiscal stimulus package. With the Democrats controlling Congress and the Republicans controlling the Senate, how diluted will the economic rescue package be? Longer- term concerns will be the rising polarisation and prejudice, which could risk damaging US growth and hamper plans on achieving a sustainable fiscal position. Monetary stimulus was also delayed, with the US Federal Reserve deciding to maintain course against a background of political uncertainty.

In the UK though, monetary stimulus was increased. Against the backdrop of the second national lockdown, the Bank of England’s Monetary Policy Committee met to agree to keep interest rates on hold at the historically low level of 0.1%, and not stray into negative territory. However, it did decide to increase its quantitative easing programme by a further £150 billion, to provide stimulus during this second round of lockdowns. This was joined by the Chancellor, Rishi Sunak, announcing that the government’s furlough scheme would be extended beyond the lockdown period to March 2021.

With the UK facing rising COVID-19 cases initiating a second period of lockdown, and an uncertain Brexit, it was essential that both monetary and fiscal stimulus responses were strong and co-ordinated.

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All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 9th November 2020.