November 10, 2020, Investment News - While the presidential election is still technically undecided, the likely outcome of a Joe Biden victory and a divided Congress has produced a collective sigh of relief from the financial services industry. It might say more about the workings of government than it does about the financial markets, but the general consensus among some financial professionals is that gridlock is good.
“We expect divided government to be good for stocks as there are unlikely to be big changes on taxes and no big green new deal as moderates push back on the more progressive wing as the Democratic House lost as many as 10 seats,” said Bryan Beatty, partner and senior adviser at Egan Berger & Weiner.
“The markets like clarity and consistency, and a divided government will give us probably the least change that could have come from this election,” Beatty said. “The markets like knowing that tax policies aren’t going to change dramatically.”
While it is basic economics that taxes create friction, it is worth noting that the stock market chugged along quite nicely for 30 years prior to President Donald Trump’s sweeping cuts to corporate and individual taxes.
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