March 28, 2023
Global Stocks Bide Time as Caution for U.S. Elections Set In

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On Friday, global stocks barely moved as investors tightened their positions, with the U.S. presidential elections just two weeks away and awaiting a breakthrough in stimulus negotiations taking place in Washington. On Thursday, the final debate took place between U.S. President Donald Trump and his Democrat rival Joe Biden. While it did boast a couple of surprises for election watchers, but heading into the November 3rd poll, it also reinforced investor caution. After the debate ended, there was a slight dip in the US S&P 500 futures, but they remained flat for the most part in late Asian trade. 

There was a 0.5% gain in the underlying index in the previous day due to hopes that the White House and the U.S. Congress could soon make a deal on another financial stimulus for dealing with the economic problems caused by COVID-19. It is expected that some of the losses in the week would be clawed back by European stocks with a 0.4% increase in Euro Stoxx 50 futures before they opened for cash trading. There was hardly any movement in shares in Asia with the MSCI’s broadest index of Asia-Pacific shares other than Japan staying flat while there was a 0.2% rise in Japan’s Nikkei. 

Mainland China’s CSI300 index also rode by 0.2%. During Thursday’s debate, Biden once again criticized Donald Trump over his handling of the coronavirus pandemic, as the current U.S. President brought up the unfounded corruption accusations that were made against Biden and his family. Market strategists said that the performance of the US Futures was an indication that the market didn’t believe Mr. Trump would be able to boost his odds of winning the elections. When it comes to the polls, Biden seems to have widened his lead and this has prompted numerous investors to bet on a Biden victory and also a ‘blue sweep’, which means that Democrats will claim both the chambers.

Even though Democrats are planning to boost corporate taxes, which means capital gains could affect share prices, but these blows are offset by their promise of a large fiscal stimulus. Under a Biden presidency, the clean energy sector is certainly going to see some benefits and this will come at the expense of conventional energy firms. The Dow Jones gas and oil index is down by almost 49% this year and Biden also reiterated his campaign promise of achieving net-zero-emissions by the year 2050. 

The market rally was led by the Nasdaq Index, but lately, it has been underperforming. This week, it lost 1.4% on concerns that Democrats may take a harder stance where tech companies are concerned. Investors could also decide to take their profits on them before increases are made in capital gains tax. The U.S. borrowing costs have also increased due to the expectations of a bigger stimulus by the government. In the near-term, investors are keeping an eye on talks of another round of fiscal stimulus and House Speaker Nancy Pelosi reported that they had made some progress in their negotiations with the Trump administration.

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