Divided Congress good news for Wall Street

A demonstrator near the US Capitol as election counting continued. Picture: AFP

Gridlock in the presidential race and a divided Congress means the chance of major policy changes in the United States has slumped, which is being taken as good news on Wall Street.

The unexpected rally - the biggest-ever post-election gains in the US - shows the markets are exhibiting showing some patience over the final result, although this will be short-lived.

What is already known is that Congress remains split with the Republicans controlling the Senate and the Democrats the House of Representatives, which means the chance of either Trump or Biden pushing through dramatic changes is weak.

That is being interpreted as good for business.

But this is in stark contrast to the rally at the start of the week on the expectation that Biden would sweep to victory and bring in a big stimulus package.

Biden may still sneak home but his chances of getting big incentives through Congress have diminished.

The tech giants like Google, Amazon and Facebook rallied strongly today because the divided Congress also means less chance of a regulatory crackdown.

It should be remembered Trump instituted legal action against Google last month, so his return would not be a free pass for the so-called FANGS.

A return of Trump would see increased protectionism and increased tension with China, neither of which are good for stocks.

They are certainly bad news for Australia, which depends on an open multilateral global order which Trump has rejected with his America-first policies.

Strangely missing from the election analysis is much mention of COVID, which on present form is ravaging Europe and the US and will once again dominate thinking on Wall Street until a vaccine arrives.

For the moment it’s an easy truce as the final votes are counted.