US post-elections scenario: Pandemic, stimulus, Senate, shutdown… and Trump – UOB

Senior Economist at UOB Group Alvin Liew reviewed the potential scenarios following the US elections.

Key Quotes

“Following a few days of uncertainty, on Sunday (8 Nov), Joe Biden was declared as PresidentElect with 290 votes against Trump’s 214 votes, after being awarded the electoral votes of Pennsylvania and Nevada.”

“President Trump has not conceded and his legal team will continue legal election challenges in key states. Barring any unlikely litigation surprises in Trump’s favour, all the election-related legal disputes are expected be resolved and all states will have certified election results by the 8 December safe harbor deadline. And at that point (or even before 8 Dec), Joe Biden will be officially declared US President-Elect, irrespective of whether Trump eventually offers his concession or not.”

“But attention on the US elections is not over yet, and the focus shifts to the Senate race where the control of the upper chamber of the US Congress remains undecided as Democrats and Republican seats are tied at 48 seats each. Key to the race will be the two Senate seats in Georgia in a runoff election on 5 Jan 2021, because no single candidate managed to win more than 50% of the votes as required by the state laws of Georgia.”

“Market expectations are that Democrats are unlikely to win both seats in this historically Republican state. And the risk of a unified Democrat government (Blue Wave), may also work against the Democrats in Georgia. Our base case remains that it is likely to be a divided Congress where Republicans retain a slim majority in the Senate (51-49) under a Democrat President Biden and a Democrat-majority House of Representatives. A divided Congress is expected impede on Biden’s ability to push through domestic policies and Senate appointments of key positions in government.”

“Biden’s first announcements after his confirmation as President Elect were to set up a taskforce to combat the surging COVID-19 pandemic and to unify and heal “the divisions and wounds of America”. Beyond containing the pandemic and unifying a polarized America, the immediate US political event to focus on is the 11 December (2020) government funding deadline. The complication with the negotiation is that it will also be tied with a potential fiscal stimulus. Despite the proximity to the deadline, it is still very uncertain how the fiscal stimulus discussion will pan out. If the Congress fails to agree to a government funding bill, the US government will face a partial shutdown before the end of 2020.”