Investors May Welcome ‘Blue Wave’ in November Amid Stimulus Battle In Washington
Investors have been optimistic about a “blue wave” in Washington because it could drive a stimulus starved economy; however, without one-party control in Washington, analysts worry that the fight for aid packages will persist past November. The country relies on federal action to offset the economic losses from COVID-19, and Wall Street is no exception. Americans need fast action as millions are frustrated with the lack of fiscal intervention during the coronavirus pandemic.
Source: "Washington DC" by barnyz is licensed under CC BY-NC-ND 2.0
The prospect of getting a second stimulus check is a primary concern for millions of unemployed Americans who depend on government aid for necessities. Citizens desperately need the relief bill and have grown upset with the ongoing bipartisan disagreement. For the past few weeks, Republican and Democratic leaders have gone head-to-head on the matter. Trump scrutinized the legislative debate on social media: “The House & Senate should IMMEDIATELY Approve 25 Billion Dollars for Airline Payroll Support, & 135 Billion Dollars for Paycheck Protection Program for Small Business,” he tweeted.
House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer rejected Trump's proposition because it does not help all Americans. At a press conference, Schumer said that elected officials should not “take care of one portion of suffering people and leave everyone else hanging.”
Both parties have refused to compromise, spurring Wall Street into volatile territory. In early October, Democrats made it clear that they would not settle until more aid is allocated to Americans. Trump took his frustration with the disagreements to Twitter: “I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business.”
Stocks tanked immediately after Trump's release –– the Dow tanked over 400 points in one day alone. Stock prices have since recovered since Trump agreed to negotiate again; however, investors are still sensitive to stimulus action that the economy needs to recover.
Investors have expressed the same irritation with Washington’s inability to settle on a deal. Despite many investors’ hopes for four more years of a Trump economy, Wall Street is warming to the idea of a sweeping Democratic win in November. Analysts believe that Biden’s lead in the polls could reduce the likelihood of a contested election and possibly take the Senate. Economists are attracted to this idea because the “blue wave” indicates less pushback on crucial agendas because only one party is in control; they also have high hopes for increased stimulus measures if Biden is elected.
“The market is pricing in a Democratic wave. It’s not scared,” said Quincy Krosby, chief market strategist at Prudential Financial. "The market is accepting this in lieu of a contested election … The market, I think, is beginning to understand a blue wave doesn't necessarily mean an ultra-progressive agenda."