Trump warned that the stock market would crash if Biden wins. The Dow Jones is having its best month since 1987.

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“The Dow Jones Industrial just closed above 29,000! You are so lucky to have me as president,” Trump written on September 2. “With Joe Hiden, it would crash.”

The S&P 500 had its best rally of election week since 1932. And despite a sharp pullback on Monday, the Dow Jones was up nearly 12% in November, on track for its best month since January 1987.

“In terms of Biden bad for the market, we can already see the opposite to be true,” said Daryl Jones, director of research at Hedgeye Risk Management.

Wall Street went from Trump

There is no doubt that Trump’s tax cuts and deregulation have helped boost markets. His trade war with China and his love of tariffs, however, were clearly negative for stocks.

Biden signals that he will not adopt extreme policies that shake the markets. Its economic team, unveiled on Monday, is headed by Janet Yellen, the former president of the Federal Reserve hit by the crisis with which investors are very comfortable.

“Biden shows us that from a business and economic standpoint, it’s likely to be moderate,” Jones said.

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November’s strong performance on Wall Street reflects in part the relief that the election cleared a huge cloud of uncertainty, even though the votes were slow to count. Prior to the elections, the constitutional crisis and the transfer of power raised serious concerns. But investors have largely ignored Trump’s barrage of election-related lawsuits as a doomed spectacle.

“The fear was that there would be a seriously contested election,” said Kristina Hooper, chief global market strategist at Invesco. “Certainly this is disputed, but it is recognized that there is very, very little chance that President Trump will actually succeed in his attempt to overturn the election results.”

Gridlock beats the blue wave

Better yet from a Wall Street perspective, the election failed to produce the blue wave Democrats hoped for.

Democrats are expected to win both races in Georgia’s second round to take control of the Senate, with Vice President-elect Kamala Harris breaking a 50/50 draw.

Republicans are the big favorites to retain control of the Senate, according to PredictIt, an online prediction market.

A divided government in 2021 means Biden won’t be able to raise taxes on businesses and individuals, a huge relief for investors. It will also limit Democrats’ ability to pass sweeping climate legislation.

Markets focus on game-changing vaccines

The celebration on Wall Street comes even as suffering mounts on Main Street.
The pandemic returned this fall with a vengeance, with coronavirus infections and hospitalizations at record levels. Health restrictions are back and federal relief is about to expire.
It all hammers mom-and-pop boutiques, cinemas, hotels, airlines, and restaurants. Unemployment claims have risen in consecutive weeks, and the government employment report due on Friday is expected to show hiring slowed in November.

But investors are looking beyond the worsening pandemic and instead focusing on huge advances in vaccines.

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“Vaccine news is a real game changer,” Hooper said. “The stock market has this great ability to look through the immediate headwinds to a future that looks brighter.”

Modern (RNAm) said on Monday that his vaccine was 100% effective against severe Covid-19. This is a huge positive considering that just a few months ago, it was debated whether an effective vaccine could ever be developed.

Now there is greater confidence in a stronger economic recovery in 2021 that will include hard hit sectors like travel.

Bank of America economists predict that global GDP will grow 5.4% in 2021, the best year since 1973. US GDP is expected to grow 4.5%, the highest since 1999.

“A year of vaccine and not of virus, a year of reopening and not of lockdown, a year of recovery and not of recession,” Michael Hartnett, chief investment strategist at Bank of America, wrote on Monday.

The gap between rich and poor is widening

The market boom sends a positive signal that can make nervous consumers and businesses spend instead of stopping. This, in turn, can stimulate the real economy.

Yet the V-shaped recovery on Wall Street is another example of how the pandemic is worsening inequality. This is because millions of Americans are not stimulated by the market boom.
Only about half (52%) of American families have some level of investment in the market, mostly through 401 (k) s and other retirement accounts, according to the Pew Research Center. Only 14% of households are directly invested in the market.

And the soaring stock market is likely widening the gap between the rich and the poor, as well-off families have a lot more skin in the game.

In the first quarter of 2020, the richest 10% of U.S. households owned 87% of all stocks and mutual funds, according to the Federal Reserve. The middle class, on the other hand, held only 6.6% of the shares, according to Professor Edward Wolff at NYU.
The markets are expecting a perfect 2021. Will they get it?

It doesn’t matter who owns the stocks, the markets cannot go up indefinitely.

At some point, vaccine optimism will be taken into account. The epic rebound on Wall Street – the S&P 500 is up 61% from its March 23 low – has pushed market valuations up to levels not seen since the dot-com bubble.

Hartnett of Bank of America argued that it would be “ludicrous to think that big stock market gains here” won’t cause backlash, including higher inflation, higher taxes, and higher bond yields. This is why he advises his clients to “sell the vaccine in force in the months to come”.

“We expect early price spikes at 21,” Hartnett wrote.



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