This post was originally published on this site
Jerome Powell
Agence France-Presse/Getty Image
A contentious U.S. election and its yet-to-be-determined outcome won’t change the most important thing investors need to know about Washington’s power structure, argued Canaccord Genuity strategist Tony Dwyer on Wednesday.
“While there can be further financial market uncertainty until the final results of the 2020 election are in, the most powerful person in the world remains the Fed Chair Jerome Powell,” Dwyer said in a Wednesday note.
Stock-market bulls haven’t been fretting about the unclear outcome in Tuesday’s elections, with the Dow Jones Industrial Average DJIA, +2.22% soaring around 750 points, or 2.8%, while the S&P 500 SPX, +2.84% rallied 3.3%.
See: The Dow is on pace for its biggest post-Election Day rally in 120 years
Democratic nominee former Vice President Joe Biden leads President Donald Trump but remains shy of the 270 electoral college votes needed to win the presidency as counting continues in a handful of battleground states. Democratic prospects for taking control of the Senate were shrinking; Democrats were set to easily maintain a House majority.
Read: What a lack of a Democratic ‘blue wave’ means for the stock market
The lack of a Democratic sweep of both the White House and Congress was seen as diminishing the prospects for another multi-trillion dollar round of financial aid spending, but some analysts argued that a Republican Senate was a relief to investors fearful a Democratic sweep would lead to the repeal of the 2017 corporate income tax cut.
Also see: Stock-market rally shows investors care more about taxes than fiscal stimulus, says Wall Street bull
“Ultimately, the Fed has been clear that it is not raising rates for the foreseeable future due to disinflationary pressures, which suggest the positive impact the Fed has had on money available to fund future growth should remain in place,” Dwyer wrote.
“Remember, a significant and sustainable period of economic retrenchment comes when there is a need for money to fund forward growth but very little access to it. The opposite is true today,” he said.
For his part, Powell and other Fed officials have emphasized the need for additional fiscal spending by Congress to help shore up the economy, warning that the Fed’s extraordinary monetary policy actions have a limited impact.
The Fed began a two-day policy meeting Wednesday. Powell is expected to use his Thursday news conference to again urge fiscal action.
