Executive summary
- Biden has won the US presidential race, with the Democrats holding the House, and the Republicans likely to retain the Senate. Risk-assets have reacted positively to this Biden led ‘divided-government’ outcome.
- Equities should potentially do well under President Biden, as US fiscal support over time will likely be significant. Historically, a Democrat President with split legislative power, can result in a fiscal-stimulus ‘sweet-spot’ that is great for equity market performance.
- Asian equities could also benefit if a more dovish US foreign policy results in US-China relations stabilising and potentially improving over time.
- Pressures are likely to continue to build over time for US 10y yields to slowly drift higher, from stronger macro data, higher equities, and rising inflation expectations.
- US dollar strength is likely to fade over time as the wider US current account deficit drives the dollar down.