Stocks Win in a Landslide

By Alex Eule |  Wednesday, November 4

Still Counting. Election uncertainty was atop the list of risks cited by market strategists in recent weeks. Sure enough, it's been roughly 24 hours since the last votes, and there's still no clear winner in the race for president. But the investor worry hasn't arrived. The S&P 500 jumped 2.2% today, while the tech-heavy Nasdaq Composite soared 3.9%. For both indexes, it was their best-ever post-election performance. So much for uncertainty. 

It turns out the formula for a contested election wasn't buying traditional safe-havens like gold, but rather big-tech stocks. While the precious metal fell, tech soared. Facebook closed up 8.3%, Amazon.com gained 6.3%, Google-parent Alphabet jumped 6.1%, and Apple rose 4.1%.

There were plenty of good theories for the rally. The most likely -- though not guaranteed -- election outcome now looks to be a Joe Biden presidency with a Republican Senate. That's a recipe for gridlock, meaning little chance for tech regulation, progressive cabinet members, or tax cuts. Investors are now essentially expecting the status quo from Washington. Today, at least, that seemed to offset the diminished likelihood of a large stimulus plan.  

The stimulus doubts sparked a rally in Treasuries, pushing the 10-year yield down by 11 basis points, to 0.768%. It was the 10-year yield's largest drop since April. Here's how Alexandra Scaggs explained the move on Barrons.com:

The declines constitute a partial reversal of yields’ steady climb higher over the past month, driven by growing expectations for a Democratic sweep. A unified government under Democratic control was expected to pass a larger coronavirus aid package. And more spending would likely boost Treasury issuance, growth, and inflation, which tend to drive Treasury yields higher.

No longer.

One other theory for the day's stock rally: The election worked. Despite images of boarded-up storefronts, there were no reports of Election Day violence. The votes are getting counted, and most folks are remaining patient. Here's an insightful summary from Brad McMillan, the chief investment officer at Commonwealth Financial Network: 

There will no doubt be litigation going forward. But the point is that litigation is an essential part of America, and it isn’t street fighting. Watching the process work is proof that the process is working, and many people were not sure of that outcome last week.

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While there are still things to worry about, as citizens and investors, we are in a much better place than we might have been—and than we feared we would be. Something to celebrate while we wait for the final results.