2020 US Elections: Biden defeating Trump with a Republican Senate to please markets

A return to normality under Biden with a Republican Senate would be welcomed by markets while rising chances of a Democrat clean sweep would send stocks tumbling. On the other hand, a Trump victory with the current split would make investors shrug off the elections whereas the highly unlikely clean Republican sweep could trigger a rally, according to FXStreet’s analyst Yohay Elam.

Key quotes

“President Biden, Republican Senate: A return to the normal president in the White House but preventing any radical changes to America's capitalism would serve as a relief to markets. While Biden's current lead suggests Democrats have a chance to win the Senate, it could prove a high watermark for the challenger and his party. Therefore, the scenario of a split government is the most likely one.”

“Clean sweep for Democrats: Seeing Sanders and AOC setting policy is the nightmare scenario for investors, and would send stocks plunging if it becomes more real. Not only banks and pharma would suffer, but broader equities. The probability is medium, and it depends more on how Trump underperforms than anything else.” 

“Trump wins, split Congress: Some voters would likely rage, but Democrats would accept the outcome. This option basically preserves that status quo and would cause markets to shrug off the results. While Trump would likely continue damaging international relations, he would be unable to move any legislation forward.”

“Clean Republican sweep: This scenario has the lowest probability. While investors may fear Trump's international tirade, they may find solace in Republican lawmakers' ability to push through their agenda.”