However, we suspect that if stocks had faltered, analysts would still have used the same divided government as a reason — in this case, the diminished chances of positive policy catalysts and a massive stimulus package to boost the US economy.
US markets have rebounded smartly from the selloff in the last two weeks of October. Stocks started recouping lost ground in the few days ahead of the US elections and picked up pace as early results indicated that Republicans and Democrats would retain control of the Senate and House respectively, and after the presidential election was called for Democrat Joe Biden.
Analysts pointed to the “gridlock” as the catalyst, where a divided government will translate into lower odds, and therefore risks, of any material policy changes such as a rollback of the 2018 corporate tax cuts.
