Biden flips Georgia risk hits profit-taking
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Risk flows tool a pause with stock index futures down by more than 1% in Asian and early European trade as Joe Biden took a lead in Georgia and was within striking distance of flipping the vote count in Pennsylvania which would ensure that he will win the Presidency.
The news out of Georgia was tectonic because it not only suggested that Mr.Biden may score an unexpected victory in a state that has not voted Blue since 1992, but it put the two Senatorial races into a runoff with Democrats having the possibility of turning the Senate into a 50-50 tie. Under that scenario, the possible Vice President Harris would be the tie-breaking vote which would effectively give the Democrats control of both the executive and the legislative branches which could lead to higher corporate taxes and greater regulation.
There is no doubt that the Democratic edge would razor thin and there is little evidence that they would embark on such a path immediately, but just the prospect of such a scenario has cooled investor enthusiasm a bit after yesterday’s giddy rally which was based on the idea of gridlock in Washington along with the steady, conventional stewardship of the Presidency by Joe Biden.
Today all eyes will be glued to the recount in the Keystone State where Mr. Biden is within striking distance of overtaking Trump with more than a hundred thousand ballots still to be counted from very heavily blue counties. The election news is sure to overshadow the Non-Farm Payroll report which is expected to print at 600K vs. 661K the month prior.
There is a decent chance that the numbers may be softer than forecast as the ISM employment index for October slipped by nearly 3% and hover just near the 50 boom/bust line. The explosion of COVID cases across the country may have had a dampening effect on business recovery and traders will be keen to look for any signs of a slowdown.
If the NFPs miss badly that could add to the acceleration of risk-off flows as any prospect of short term stimulus help from the lame-duck Congress may be unlikely given Trump’s desire to litigate the election.