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Executive Summary
The story of the global economy during the month centered around the contested election in the US, which ended up with confirmation of Democrat Joe Biden’s victory in the presidential race, while cases of Covid-19 hit record highs across the US and Europe.
What will the US election results mean?
The US elections ended with a comfortable win for Democratic contender to the presidency, Joe Biden, defeating incumbent president Donald Trump. However, Democrats underperformed expectations elsewhere, winning fewer seats than expected in the Senate and losing seats in the house.
A relatively strong win for Biden in the end: After early counts showed a Republican lead, President Trump prematurely declared victory, and refused to accept the rest of the vote count which showed him falling behind. Ultimately, the results showed a clear lead for the Democrat, and although President Trump’s continued contestation of the results added uncertainty, it is not expected to lead to anything significant.
Policy change might be limited depending on final Senate makeup: The Senate was much closer, and control will hinge upon 2 Senate seats that are up for election in January. If the Democrats fail to win both seats, they will not be able to pass their preferred legislation, making large investments and fiscal stimulus much less likely.
Global geopolitics are likely to change again: After 4 years of the Trump administration, Biden offers a return to an America allied with traditional partners. However, a stance against China is likely to continue, but be conducted through more traditional means instead. It is to be seen whether this will involve greater US investment across the world.
How has the new Covid wave affected the world?
Massive surges in Europe and the US are forcing new lockdowns: Cases in the US and Europe have seen record highs, with multiple countries as well as states now enforcing lockdowns again. Global cases have surpassed 60 mn, while deaths are closing in on 1.5 mn. As the Northern Hemisphere moves into a colder winter, these numbers are only expected to rise.
Optimism about vaccines have raised a lot of hope: Trials of 3 vaccines have shown significantly successful results, reaching above 90% in efficacy. Other vaccines are also expected to show results soon, as a worsening pandemic speeds up trials. However, logistical challenges might limit the distribution of these, especially to the developing world.
Emerging markets have been the biggest beneficiary so far: Optimism on both the US election and the optimism around vaccines have been most reflected in emerging markets, which saw substantial inflows of investment in recent weeks. While this might slow down after the initial euphoria, some markets have been able to capitalize as well.
How have commodities been performing?
Oil prices rallied with vaccine hopes:
As a Joe Biden presidency raised prospects of at least a slightly larger fiscal package, and optimism on a vaccine raised prospects of a global recovery in 2021, oil prices rallied more than 25% across the month, from lows of US$ 38.97 per barrel on November 2nd to US$ 48.77 per barrel on November 24th. Some blips were seen due to rising Covid-19 infections and new lockdowns.
Gold prices fell after an initial election day spike:
Gold prices saw a large spike after US election day, as uncertainty over the winner threatened to spiral into violence, but as the situation stabilized, prices soon fell with rising optimism across the world. Prices fell from highs of US$ 1,951.70 per ounce on November 6th, to lows of US$ 1,804.60 per ounce on November 24th.
Top 5
Emerging markets look to 2021 as Goldman adds to bullish calls
Emerging markets are set to outperform the rest of the world as a global economic rebound takes hold starting in the second quarter, according to Goldman Sachs Group Inc. With reduced political uncertainty following the U.S. election and the potential for more positive vaccine updates.
What Biden with a Republican Senate would mean for emerging markets
Current results in the US presidential election seem to indicate a Biden presidency with a Republican senate. This might be the best option for emerging markets, as a Biden administration would pursue more multilateralism in global trade, reducing uncertainty and dollar strength, while large fiscal stimulus being delayed could keep monetary policy low for much longer.
Europe’s Economy Set to Contract Again as Lockdowns Bite
Europe’s latest series of lockdowns are likely to push its economy into yet another contraction, with a 4th quarter fall in GDP now on the cards. Not only has European consumer spending plummeted, stopping a weak recovery short, but manufacturing indicators have also started to trend towards decline once more.
‘V-shaped’ recovery on track amid vaccine hopes and Biden win, says Goldman Sachs
Analysts are anticipating a more “V-shaped” recovery for the global economy than previous consensus forecasts suggested, and the rebound could now be bigger than expected as hopes rise that a coronavirus vaccine is close. The sentiment is also supported by a win by Joe Biden.
Pandemic fuels world ‘debt tsunami’
As Zambia, yet another country, defaults in 2020, the emerging world’s rising debt burden is starting to look especially worrisome. Debt levels in the emerging world have risen up to 250% of GDP, with most of the increase in debt coming from debt rollovers that add little to individual economies.
Compiled by: Chayu Damsinghe
Disclaimer: This information has been compiled from sources believed to be reliable but Frontier Research Private Limited does not warrant its completeness or accuracy. Opinions and estimates constitute our judgment as of the date of the material and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The recipient of this report must make their own independent decision regarding any securities or financial instruments mentioned herein. Securities or financial instruments mentioned herein may not be suitable to all investors.
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