With each passing hour, the possibility of a divided government is seeming more and more like the coming reality, and it’s exactly what financial advisors have been hoping for. It seems that despite the likelihood of a flurry of lawsuits, Joe Biden will be the next U.S. President and the Senate will remain concervative.
What no one seems to remember is that Senate Majority Leader Mitch McConnell and Biden have a long history of working with each other and have stretched across the aisle before to get what is needed done. Add in Biden’s long-time relationship with Nancy Pelosi, and McConnell’s recent encouragement of a new stimulus plan, and it would seem reasonable to expect stimulus and infrastructure packages. That along with a lack of a “blue wave” could be the most positive outcome possible for the economy and markets.
Power sharing seems to be what the future holds and with more moderate pieces of each political party taking over, a more common sense stimulus seems likely. Furthermore, the more radical ideas of each party may very well quiet and, from there, we will hopefully see a more bipartisanship approach to governance, instead of continued gridlock.
A country as divided as the U.S. is currently, the razor-thin margins of the election, and a Republican Senate will probably force Biden to dial back his initial tax plan and to table plans for major tax reform. Biden had proposed raising income taxes on people making more than $400k annually and boosting capital gains taxes to ordinary rates for people making more than $1 million, as well as hiking estate and corporate taxes.
