The Dow Jones remained little changed on Wednesday, holding near record highs even after backlash to President Donald Trump helped propel Democrats to statewide victories in crucial Republican strongholds.
Wall Street analysts generally believe a Democratic presidential victory next year would knock the wind out of the stock market’s sails. However, investors appear to be disregarding the impact of Tuesday’s results on next year’s elections.
The US stock market’s three major indices opened to slim losses. The Dow Jones Industrial Average sought to secure its fourth straight advance, but the index dipped 37.71 points or 0.14% to 27,454.92.
The S&P 500 added to Tuesday’s 0.12% pullback, declining another 3.43 points or 0.11% to 3,071.19.
The Nasdaq underperformed, falling 25.98 points or 0.31% to 8,408.7.
A softer US dollar helped precious metals recover from Tuesday’s slide, though the gold price continues to trade below the $1,500 mark.
As the 2020 US elections inch closer, Wall Street’s focus will increasingly turn toward the presidential race.
Precise forecasts vary, but there’s a strong consensus that a Trump victory could reinvigorate the stock market, sending the Dow and S&P 500 further into record territory. On the other hand, Wall Street seems to fear an Elizabeth Warren presidency.
A handful of US states held off-year elections on Nov. 5, providing analysts with a final glimpse at how Trump’s presidency has transformed the electoral map.
Unfortunately for Trump, the results did not trend in his favor.
The Democrats successfully flipped the state legislature in Virginia, giving them unified control of a purple state that voted for Hillary Clinton in 2016 by a margin of more than 5%.
In Kentucky, incumbent Republican Governor Matt Bevin lost the gubernatorial election to Democrat Andy Beshear by a margin of around 5,000 votes. That result was a clear upset, given that Bevin won the Governor’s Mansion by 9% in 2016. Republicans swept the remainder of Kentucky’s statewide races, but on-the-ground campaigning from Trump and Vice President Mike Pence failed to push the unpopular Bevin over the line.
While the outcomes in Virginia and Kentucky were perhaps embarrassing to Trump, political analysts were quick to warn against reading too much into Tuesday’s results. With just four states holding off-year elections, the sample size is too small to draw valid conclusions about the state of Trump’s reelection prospects.
As Jonathan Bernstein, a Bloomberg Opinion columnist and former political science professor, wrote this morning,
“It’s not unusual for out-parties to win big in midterms and other off-year elections, only to see the president’s party recover and retain the White House. To the extent that the Democrats did well, they may have been helped by Republican weakness. But that doesn’t tell us anything new about how the party will perform next fall.”
Consequently, while the 2019 elections weren’t spectacular victories for Trump, they also weren’t necessarily portentous.
On the data front, US productivity unexpectedly declined by 0.3% during the third quarter, compared to an estimated increase of 0.9%. That was the biggest decline in productivity since 2015. Productivity is inversely correlated to labor inflation, with consumers ultimately footing the bill for increased labor costs.
According to new data from Bloomberg Economics, there is a 26% chance that a recession bites the US within the next 12 months. That’s a slight decline from last month’s 27% reading.
Last modified: September 23, 2020 1:15 PM