Buying frenzy has ebbed on equity markets on Friday as European shares, US futures and oil price went into decline. Implied probability of Biden win, calculated on the basis of bets on betting markets, is already over 90%. The situation in battleground states at the time of this writing is as follows:

  • Pennsylvania: Trump 49.5%, Biden 49.2%, 95% votes cast.
  • North Carolina: Trump 50.0%, Biden 48.6%, 95% of the vote counted.
  • Georgia: Trump 49.4%, Biden 49.4%, 99% of the vote counted. (Biden is closing the gap and will likely pull ahead).
  • Arizona: Biden 50.1%, Trump 48.5%, 90% of the vote counted.
  • Nevada: Biden 49.4%, Trump 48.4%, 89% of the vote counted.

It won’t be enough for Trump to win Pennsylvania, North Carolina and Georgia as in this case, he is expected to gain only 268 votes. To win the race, Trump would need seize the lead either in Nevada or in North Carolina.

As you may know, current baseline scenario of the US vote is a somewhat unusual outcome, where the president is Democratic nominee while the GOP retains control of the Senate. This suggests that some voters expressed strange inconsistency in party loyalty - while preferring the Democrat president, they at the same time voted for a Republican senator. Even more curious, it was noticed that in some swing states this tendency was more pronounced than in the states traditionally loyal to any party.

This phenomenon could mean two things - hatred for Trump as president (which, quite possibly, given his extraordinary personality), or stuffing in battleground states. In my opinion, this is another reason to argue that Trump will have something to complain about and he won’t give up without a fight.

As expected, the Fed meeting was not a surprise. The key takeaway is that the Central Bank is ready to intervene if the situation with coronavirus would threat stability and smooth functioning of credit markets. As JP Morgan noted, such an outcome would only reinforce the case for the rally in the stock market. If the US avoids the full tide of the second Covid-19 wave, the market should at least maintain current optimism until the stimulus package is approved. Legal challenges surrounding elections is likely to drag out approval process of the aid since they can maintain an atmosphere of political hostility for a while.

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