Many US stock exchanges reached all-time highs under the Trump administration before the COVID-19 pandemic came along and reversed their gains.
But, how have investors been reacting to Joe Biden’s presidency and what can we expect for the US stock market over the course of the rest of 2021? Read on to find out…
Stocks Surge After Biden Victory
From election day in early November until January 20, the S&P 500 posted gains of over 14 percent, representing the index’s largest percentage gain from election to inauguration day for any first-term president since World War II, according to a report by New York-based investment research consultancy CFRA Research.
And since then, it has climbed by roughly another two percent, reaching 3,916 points. Other stock exchanges, such as the NASDAQ and the NYSE, also performed well over this period.
One might argue that Biden’s victory has therefore been great news for the financial markets, as it has seemingly boosted investor sentiment and led to US stock exchanges posting strong gains.
However, while this is true to some extent, it’s important to recognize that other factors are also in play.
As noted by some political and economic analysts, investors were worried that Donald Trump would try to cling to power and therefore spell bad news for the markets. However, he ultimately did yield the presidency to Biden in what proved to be a relatively smooth transition, so this certainly accounted for some of the gains the markets have posted in recent weeks.
But, other developments since November 3 can also potentially explain why US indices have been performing well.
For instance, concrete progress on the vaccine development front has boosted investor sentiment, as an effective vaccination strategy and rollout is by far the US’ best bet of dealing with the COVID-19 pandemic once and for all.
And, as stock markets have been hit hard by the pandemic, with investors shifting their portfolios in favor of safe-haven assets like gold and the Dollar, it’s not surprising that they have benefitted from the successful development and FDA approval of several vaccines.
What Does 2021 Have in Store?
The coronavirus pandemic will undoubtedly continue to dominate global headlines throughout the remainder of 2021, and it will also continue to influence the financial markets.
Investors’ focus is primarily on monitoring how effective the FDA-approved COVID-19 vaccines are at providing immunity and in turn curbing the spread of the virus within the US. As outlined earlier, investors who are bullish on equities will be hoping that they prove highly effective and will result in an end to social distancing measures and travel restrictions this year.
It should be noted that while this generally stands true for the market as a whole, some individual stocks will be especially sensitive to this, while others may see their share price take a hit as a result of the pandemic coming to an end.
For example, Amazon and other stocks that have benefited as a result of the pandemic may respond badly to this, while airlines and other travel companies should profoundly benefit.
A Quick Summary
- US stock exchanges have rallied in the two months since the US presidential election, suggesting Joe Biden’s victory has improved investor sentiment.
- Indeed, the fact that Donald Trump relinquished power did settle some nerves and benefit the stock market.
- However, there are other factors at play, particularly developments in the COVID-19 pandemic.
- The US’ authorization of a number of coronavirus vaccines certainly accounts for some of the gains stock markets have posted in recent weeks.
- This is because the stock market will benefit from the pandemic reaching its conclusion, as equities have been hit hard by it due to many investors switching out shares for less risky assets like gold, silver and the Dollar.