With the U.S. presidential election result a nail-biter, bankers, traders and financial analysts on Wednesday said Wall Street was worried the ultimate presidential winner could struggle to work with a divided Congress to fight the coronavirus pandemic and pass a quick economic stimulus package.
They spoke to Reuters as several key states reported tight margins between Republican President Donald Trump and Democratic candidate Joe Biden. Though Biden has the lead, millions of votes still need to be counted and the outcome may not be certain for days.
The results so far, however, suggest Congress likely will remain divided. Democrats were maintaining a firm grip on the House of Representatives, which could hinder Trump if he wins a second term. Republicans looked likely to keep control of the Senate, which would make it harder for Biden to get legislation passed or have cabinet members and judges approved.
"Now having (a stimulus package) done in early January or February becomes a big feat," said a bank lobbyist who was not authorized to speak publicly. "That's where the minds of bank managements are going to be next and that is certainly what the markets are focused on."
Many on Wall Street see more stimulus as necessary for economic recovery, but such a package is likely to be smaller and take longer with no "blue wave" victory for the Democrats.
"We're going to be in a period of gridlock," said Joseph Stiglitz, Nobel laureate and professor at Columbia University.
Markets were not upset by the outcome. Major U.S. stock indexes opened 0.1% to 2.5% higher on Wednesday, not the relief rally some had expected, but also not a terrifying plunge.
"Gridlock is always great for markets because you don't get extreme decisions one way or another," said Sanjay Chawla, chief investment officer at insurer FM Global. "If you really wanted to raise taxes, that would not be easy."
JPMorgan Chase & Co. Chief Executive Jamie Dimon, one of Wall Street's emissaries, urged patience for the final results and said he had faith in the systems that will decide the outcome. Other prominent financiers took to Twitter to joke about the situation or express personal feelings.
"I was wrong. It hurts," wrote Mike Novogratz, a former Goldman Sachs Group Inc partner who is now active in cryptocurrency and donates to Democrats. He had expected voters to hand Biden a more decisive win.
Ahead of the election, the financial industry's biggest worry was soaring taxes and tough regulation if a "blue wave" on election day put Biden in the White House and Democrats in control of both the Senate and the House.
This scenario sparked worry that pressure from progressive Wall Street critics like Massachusetts Senator Elizabeth Warren, Vermont Senator Bernie Sanders and Rep. Alexandria Ocasio-Cortez could push Biden further from his historically moderate positions on the economy and regulations.
Those concerns receded with election tallies showing Biden ahead and Republicans almost certain to hold the Senate.
"The concept that Elizabeth Warren would be running Treasury and Bernie Sanders would be running the Department of Labor is a lot less likely this morning than it was if we have had that 'Blue Wave,'" said Fred Cannon, research director for Keefe, Bruyette & Woods.
David Boies, a prominent corporate lawyer who represented former Vice President Al Gore in a U.S. Supreme Court case that put Republican George W. Bush, in the White House, said his Wall Street contacts prefer a divided government that makes it hard to pass laws that make extreme changes in the status quo.
The unusual election saw historically high turnout in a politically polarized population and a much larger than usual number of mail-in votes during a deadly pandemic, which slowed vote counting in key states. The divide between Biden and Trump narrowed from about 200,000 votes to just 6,000 within hours, he noted. He believes the uncertainty could last several days.
"Everyone, whether it's the man in the street or the man on Wall Street, is fascinated and focused on how this is changing," Boies said.
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