An election thriller is evolving since there is still no official result. Results, till now, grant Joe Biden 264 electors and Donald Τrump 214 electors. The election map has the following image.
As I had mentioned in last week’s weekly report, this year’s elections have been held amid a very uncertain period with volatility indices being at higher levels than their historic average ones. This is a sign of intense possible fluctuations. Furthermore, I had mentioned that traditionally in the last 90 years, after the elections, there has been a sharp drop in volatility.
Volatility index VIX, moved upwards in the middle of October, jumped to 40 before the elections and immediately after, fell 22%. From pre- election highs, there has been a drop of 31% and this has provoked an indices’ sharply upward rally.
American bonds’ prices move upwards as investors shape a clearer picture of the next President and evaluate the impact of upcoming economic measures on investment product prices.
What are the first conclusions from the market movements
The rise of the technological sector comes as a surprise as Joe Biden seems to be winning the elections and becoming the next President of the USA. Given his stance on changing the legal framework to limit the size of technological giants, this upturn raises questions. However, there are some explanations for this move.
1. The blue wave scenario, that is, the dominance of Democrats in all positions cannot come true. This means that any change in the legislation towards this direction could be stemmed by the Republicans' refusal.
2. When the elections move out of the spotlight, the outbreak of the pandemic, which is in full swing and spreading rapidly, will resurface. With Biden being more flexible in terms of a lockdown imposition, investors choose the safe way: technological companies.
3. The voting of a support package is more and more likely to happen during the next weeks. This pushes funds to stocks and therefore also to the technological sector.
4. The non- existence of blue wave, leads to investment portfolios’ diversification with exit from value shares and re-strengthening of growth shares’ mighty trend. This trend is also reinforced by the existence of zero interest rates.