Stock futures are up in November 9 trade — the first trading day since Joe Biden and Kamala Harris topped 270 electoral votes.
This suggests that investors are bullish on prospects for stocks under Joe Biden’s presidency and thrilled about the announcement by Pfizer PFE that its Covid-19 vaccine is 90% effective.
Investors see prospects for trade improving under Biden’s leadership and prominent business leaders expressed enthusiasm for his pledge to unite the nation and his approach to tackling the pandemic.
The news that a Covid-19 vaccine being developed by Pfizer and Germany’s BioNTech was much more effective than expected has turbocharged investor optimism.
This is a time to buy — regularly investing in a low-fee S&P 500 index fund.
Why Investors Are Bullish
Given the complexity of the markets, it is unwise to place too much emphasis on news stories to explain market behavior.
Having said that, it is possible that some investors had placed bearish bets on the premise that considerable uncertainty about the outcome of the election would persist for months.
As it became clearer last week that the election was taking place without major interruption, those bearish bets were looking unwise and it is possible that part of what drove stocks up was reversing those bearish bets.
Investors now seem to feel relief that extreme policy uncertainty will go away under a Biden administration and that Senate control could remain in the hands of Republicans — thus reducing the chances of major shifts in government policy.
An Invesco market strategist said as much. According to Brian Levitt, Invesco global market strategist, “A Biden presidency with a Republican Senate would be unlikely to see any increase in taxes, which was arguably the biggest fear investors had about a Biden presidency. And a Biden presidency could mean a return to a more traditional, predictable approach to trade policy, which would likely result in less volatile markets,” according to CNBC.
The Pfizer news — that the Covid-19 vaccine it is codeveloping is 90% effective — was far more important to investors this morning. According to CNBC, Anthony Fauci said that a 50% to 60% effective vaccine would be “acceptable.”
Peter Boockvar, chief investment officer at Bleakley Advisory Group, told CNBC, “Amazing news from Pfizer with 90% efficacy. This hopefully is the beginning of the end of our fight against Covid.”
The bullish effect of the Pfizer news was much greater than the election results.
After all, before the vaccine news was announced, futures were up — but not nearly as much as after that news broke.
How so? As of 4:00AM November 9, NASDAQ futures were enjoying the biggest pop — up 258 (+2.1%) — while the S&P 500 (+52, +1.5%) and Dow Jones (+376, +1.3%) futures also rose.
The vaccine news boosted the Dow and the S&P 500 — but crimped the NASDAQ. By 9:10AM Dow Futures were up 5.8% (or 1,646) and the S&P 500 futures popped 4.4% (+153) while the NASDAQ futures were inching up a mere 0.58% (+70).
Prominent Business Leaders Optimistic
Several well-known business leaders expressed optimism about the Biden victory.
Amazon CEO Jeff Bezos noted that the election of Biden and Harris indicates that “unity, empathy and decency are not characteristics of a bygone era,” according to CNBC.
Microsoft cofounder Bill Gates said he looked forward to working with the new administration on “getting the surging pandemic under control.”
Facebook chief operating officer Sheryl Sandberg focused not on the top of the ticket but on Harris. CNBC noted that Sandberg posted on Facebook: “After a few long days, we now know that Joe Biden will be our next president – and for the first time in 231 years, our next vice president will be a Black and South Asian American woman who is the daughter of immigrants,” noted CNBC.
What Economic Policies Will Biden Pursue
As a veteran of the recovery from 2008 financial crisis, Biden is likely to have drawn the lesson that economic stimulus through government spending — rather than tax cuts is the right remedy.
That’s according to Thomas Kochan, a professor at MIT’s Sloan School of Management. As Kochan told the Boston Globe, “[Biden has learned that effective stimulus flows from] swift and large-scale government spending, [rather than] tax cuts.”
John Fish, chief executive of Boston’s Suffolk construction company thinks a $1.5 trillion package will be acceptable to both sides of the aisle. Fish said that package should be “Focused on a new round of Paycheck Protection Program loans and grants for small businesses, aid to state and local governments, and jobless benefits,” noted the Globe.
While there is considerable uncertainty about what Biden can do, one thing is clear — Biden will listen to science and respect experts as he leads us through the next four years.
It is this return to rationality that makes it harder to bet against rising equity prices.