Four years ago, the result of the US election took people by surprise but not half as much as the subsequent market reaction. A negative initial response to the unexpected Republican victory in November 2016 quickly changed into a focus on an expected tax-cutting, de-regulation story.
This year the market response has been more predictable. In the run-up to the election, expectations of a Blue Sweep saw predictions of a big fiscal stimulus in the New Year, more growth and rising inflation. However, as soon as it started to look unlikely that the Democrats would win both the White House and the Senate - a pre-requisite for that stimulus - the so-called reflation trade started to unwind.
On Thursday morning the outcomes of both the Presidential election and the Senate race remain unresolved. But having won both Michigan and Wisconsin, the path to the White House looks far easier for Joe Biden than Donald Trump. As important, however, the chance of a Democrat majority in the Senate has all but disappeared.
The result is very likely to be gridlock in Washington. Normally that is an outcome that markets welcome because it takes the most extreme policy agendas, both left and right, off the table. In the face of a devastating pandemic, it may look less sensible to tie the hands of the President.
But that is what where we find ourselves. Lame duck may be over-stating it, but if Joe Biden does get over the line today or tomorrow, he should prepare himself for a frustrating four years. The US is a hopelessly divided country and bi-partisan co-operation is nowhere to be seen.
In the market, the big winners from what looks likely to be a Biden-led but divided government have been technology stocks, now viewed as defensive growth plays, and the safe haven of government bonds. Sectors that appeared most threatened by a Democrat with a free hand, such as traditional energy and healthcare, have also staged a relief rally.
Meanwhile, the parts of the economy most looking forward to a Biden agenda - infrastructure and clean energy - have given back their recent gains. Mr Biden has proposed $2trn of spending over the next four years on decarbonising the US electricity grid and moving towards net-zero emissions by 2050. His plans for clean power generation and a network of charging stations for electric cars will be harder to achieve without the support of the Senate.
The pre-election thinking was that a big stimulus would boost activity and help the cyclical, value stocks that require a buoyant economy to prosper. The post-election reality is that we probably face more of the same - a world in which investors will reward those companies that can deliver strong and reliable growth in a difficult environment.
The rally in stocks has come despite worrying signs that the outcome of the election will be contested. Multiple lawsuits have already been filed in key battleground states. Official confirmation of the result could be days or even weeks away.
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