But market strategists say investors need to start preparing for how a Biden presidency will impact certain sectors.
Experts also point to the fact that Biden, as vice president under Barack Obama, has experience helping the economy recover from a recession.
“Investors should take some solace in the notion that Biden will be in somewhat familiar waters as he begins his Presidency,” said Jeff Schulze, investment strategist at ClearBridge Investments, in a report. “As Vice President, Biden took office in the midst of the global financial crisis and helped steer the economy back into an expansion characterized by steady but slow economic growth.”
The new regime in Washington may also have an impact on the market beyond specific industries and sectors.
Value over growth
“There could be a shift to value sectors like health care,” said Andrew Rosen, president of Diversified Lifelong Advisors, in an interview with CNN Business. “It’s healthy to see the recent tech pullback. There needs to be more diversification.”
Valuations for tech and other growth stocks may also come under pressure if the economy continues to rebound next year — a scenario that could pick up pace once a Covid-19 vaccine becomes widely available.
Investors may soon rotate back into hard hit consumer stocks, many of which still pay solid dividends despite the pandemic. With that in mind, defensively oriented stocks — companies with lots of cash and little debt — could thrive.
“Companies with stable balance sheets, reliable cash flows, and the capital to bridge the gap created by Covid-19 would outperform,” said Lauren Goodwin, economist and multi-asset portfolio strategist with New York Life Investments, in a report Monday.
International stocks, particularly those in markets like China that were a main target of Trump’s trade wars, could rebound too.
“Emerging markets could benefit from less of an ‘America First’ policy under Biden,” Rosen added. “He may try to fix some international relationships to pave way for less acrimonious trade policies.”
Despite the early returns, it may be unwise to focus too heavily on how markets are doing in the immediate aftermath of the election. Short-term successes could also become longer-term investing flops.
“Financials were the best-performing sector on the day after the 2016 election, and that group, along with energy, were the top two over the ensuing month,” ClearBridge’s Schulze noted. “While these groups continued to show strength into early 2017, they have been two of the three worst-performing sectors since.”