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The Market Is Ignoring Election Chaos for Now

The likelihood of Republican control of the Senate is offsetting the problem of presidential uncertainty.
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Stocks are indicated higher in the early going but the election results have been a roller coaster ride of emotions. Tuesday night we went from a near-certain Biden victory to a celebration of a potential Trump win, and now we are dealing with increased rancor as the counting of votes drags out in several states. It is unlikely that there will be a clear winner for at least a few days and even then the likelihood of litigation is very high.

One thing that is helping the market is that it looks very likely the Republicans will maintain control of the Senate. This assures gridlock and makes it nearly impossible for a Biden administration to implement policies such as increased taxes, Medicare for all, a new Green Deal and court-packing.

Some folks are concerned that divided government could kill a fiscal stimulus deal, but there is likely to be some efforts for a smaller bill in a lame-duck session. At the moment the market doesn't seem too concerned about that issue.

Once again the market action is catching many folks by surprise. The Dow Jones Industrial Average is close to flat, the S&P 500 is seeing a gain of about 0.8% and the Nasdaq 100 is flying with a gain of more than 2.5%.

Strength in the Nasdaq 100 is largely due to the FATMAAN names, which are benefiting from a perception that antitrust initiatives are less likely now and from "safe haven" status if there isn't more aggressive fiscal stimulus. Money is flowing into the favorite growth names as there is a view that there will be less inflationary pressure, which helps boost multiples on stocks such as Amazon (AMZN) and Apple (AAPL) .

The potential for a jump in volatility is still quite high but the good news is that market players still seem to have a strong appetite for stocks regardless of all the election drama. Gridlock in Washington is almost always viewed as a market positive as it helps to ensure that the status quo is maintained. The market wants to see business conducted in the same way it has been.

We are going to see a lot of anger and frustration as the election continues to unfold, but the price action of the market is positive and that bodes well for the longer term. One thing is clear -- this is a deeply divided country and it is not changing anytime soon. A divided government may be the best outcome for the health of the country and the market.

At the time of publication, Rev Shark had no positions in the stocks mentioned.