The Electoral Result Risks a Recovery in the US

The US election results revealed a deeply divided country anticipating a legislative paralysis in the coming months. The President of the country, Donald Trump, and the Democrat, Joe Biden, continued scratching each electoral vote to be distributed in Wisconsin, Michigan, Georgia, North Carolina and Pennsylvania. Meanwhile, the tight fight for the Senate generated great unknowns on when and how the next fiscal stimulus will arrive.

Paul Donovan, chief economist at UBS, stated that the election results so far indicate continued polarization in US politics. That caused concern for the long run. The number of Covid-19 infections increased by 91,500 new cases during election day. All this at a time when the symptoms of a slowdown are more than evident.

The Atlanta Fed GDP Now estimates that the US economy is currently growing at a rate of only 3.4% after having rebounded by 33.1% in the third quarter (both annualized figures). At the same time, on Wednesday, we learned that the private sector generated 365,000 payrolls in October. It fell below the expected 600,000 estimates.

Elections headed for a possible second round?

The urgent need to inject a new package of fiscal measures to maintain the verve experienced between July and September now depends on the final composition in both the Senate and the House of Representatives. Democrats will retain control of the House of Representatives. Therefore, losing some seats to Republicans who, despite being a minority, could exert greater political pressure. Estimates show that they can expand their presence in Congress to around 200 seats.

In the Senate, the Democrats managed to seize the seats so far held by the Republicans in Colorado and Arizona. At the same time, the latter did the same with the Democratic seat in Alabama. A good part of the legislative races to the Upper House would have predicted the possibility of a Democratic sweep. Therefore, unlocking the possibilities of massive public spending of more than 3 trillion dollars, fell on deaf ears. Republicans hold their positions in South Carolina, Montana, and Kansas. Republican seats in Maine, North Carolina, Georgia and Alaska, as well as the Democratic seat in Michigan, remain to be decided.

The leader of the Upper House, Republican Mitch McConnell, faced re-election in Kentucky. His counterpart in South Carolina, Lindsey Graham, also saved his seat as well as Steve Daines in Montana. In North Carolina, Republican Senator Thom Tillis has a head start. In contrast, Republican Senator Susan Collins moved far ahead in Maine as Iowa Senator Joni Ernst won her run for a second term. Moreover, in the particular case of Georgia, where two seats in the Upper House are at stake, if no candidate obtains more than 50% of the votes, as the polls indicate, the two races would go into a second round. The results will not be determined until January 5.