Market reaction to Biden victory and Taylor Wimpey supercharges 2021 expectations

“Even though Donald Trump has not yet conceded, markets have taken Joe Biden’s election victory to be a done deal which gives another leg up to global equities,” says Russ Mould, Investment Director at AJ Bell.

“Stocks had already started to move higher last week on the assumption there would be a divided government. This expectation extends into the new trading week following the latest voting figures which put Biden in first place.

“While the threat of legal action by Trump could delay proceedings, investors are pricing in almost zero chance for the incumbent to destabilise affairs. So that means the market is in risk-on mood with equities rising across Asia, Europe and pre-market indicative prices also suggest a good day for US stocks.

“The playbook is clear to see – investors are buying tech stocks again in the belief that there would gridlock in Congress and so Biden would find it hard to push through punitive tax measures that could have hit the tech sector. Tech is also one of the few places where there is expected to be sustained earnings growth at a time when economies are under pressure from the pandemic.

“Mining shares are also in demand in the belief that Biden would have a more predictable trade policy and that some tariffs on Europe and China could be rolled back, thus benefiting the commodities market.

“The FTSE 100 jumped 1.5%, putting it back at the 6,000 level. Big risers included Anglo American, up 3.8%, and tech-heavy Scottish Mortgage investment trust which advanced 3.3%.

“Germany’s Dax index traded 1.8% higher, Japan’s Nikkei 225 index moved 2.1% ahead, and it looks like the US Nasdaq index will open 1.8% up on Friday’s market closing price.

“For now, markets are having a party, yet it could be a different tone going into 2021 if it looks like the next round of fiscal stimulus measures in the US aren’t going to meet previous expectations, which could certainly be the case.

“Getting covid-19 under control remains a priority as well as providing economic support and if there is no improvement going into the new year then markets could find reason to become unhappy again.”

Taylor Wimpey

“Building back profitability brick by brick, Taylor Wimpey is winning over the market in a big way. What is striking about the latest update is its confidence not just in this year – when the pent-up demand from lockdown and a stamp duty holiday have been obvious tailwinds – but also next year.

“To tell the market you will top expectations in 2021 – when the jobs situation in the UK may well have deteriorated – is a bullish move.

“This is underpinned by the company’s bumper order book and the fact that house sales agreed now will not complete until next year. A return to dividends at the full-year stage and the promise of a possible 2022 special dividend will be music to the ears of income investors.

“The company’s plan to strip out costs, principally by targeting that most maligned category of employees, middle management, is expected to bring margins back to previous levels.

“Having raised cash in June, the company is also buying land. Homes built on land purchased at depressed levels are likely to deliver more favourable returns.

“And the long-term dynamics of insufficient supply and growing demand for quality housing are likely to endure once the initial shock of the pandemic has subsided.”

These articles are for information purposes only and are not a personal recommendation or advice.