With Election Day in the rearview and promising developments in efforts to create an effective COVID-19 vaccine, markets reflected renewed hope that the nation’s economic recovery soon could turn a corner.
The Dow Jones Industrial Average, S&P 500 and Nasdaq indices all hit record highs on Monday, which marked the first day of trading since all major media outlets called the presidential election in favor of former Vice President Joe Biden.
Loren Rice, an associate professor of accounting and business at Clarke University in Dubuque, said a rise in optimism is not uncommon in the days following an election. Regardless of who wins, a conclusion to the process can restore a sense of normalcy.
“In general, businesses tend to put off decisions leading into a presidential election,” Rice said. “Businesses can get paralyzed by uncertainty. So many of them decide to delay big investments or hiring decisions until the election ends and that uncertainty goes away.”
But on a banner day for Wall Street, Rice said, the election wasn’t the main factor driving markets.
Pharmaceutical company Pfizer shared details on the development of a vaccine with a 90% efficacy rate, raising hopes of an eventual end to the COVID-19 crisis.
It was a rare bit of good news in a nation that had struggled to harness the spread of the virus. The number of COVID-19 cases soared past 10 million in the U.S. on Monday, and deaths were approaching 240,000.
“As a nation, we have been very unsuccessful at handling the pandemic, and now it is getting worse on an almost daily basis,” Rice said. “That news (about a vaccine) means we can do something other than what we have been doing so far. Trying something else gives people hope.”
Potential policy shifts stemming from Biden’s win could provide a new blueprint for how to get out of the ongoing economic downturn.
Biden has proposed more than $7 trillion in new spending over the next decade, a massive investment that would upgrade roads, bridges and highways and build the framework of a new clean-energy economy. Such large-scale investment is widely seen by economists as a viable way to boost economic recovery in difficult times.
The end of the election also raises the chances that federal lawmakers finally can pass a new stimulus package.
Congress approved a $2.2 trillion coronavirus relief package this spring that proved to be a critical safety net for business and workers alike.
Efforts to pass another, comprehensive support measure were halted in the lead-up to the election.
Eric Munshower, professor of economics at the University of Dubuque, believes the post-election landscape will have less political tension and a higher likelihood of collaboration between parties. In his view, it’s already way past due.
“A lot of small retail and restaurant businesses have just been trying to stay alive in hopes of another stimulus coming out,” he said. “From their point of view, it is crucial.”
Mark Stevens, chief investment officer for Heartland Financial USA, said the likelihood of a split Congress also is positive news for the business community. Democrats maintained control of the U.S. House of Representatives. A pair of likely runoff elections in January will determine the fate of the Senate, but most experts predict the GOP will remain in control.
“As Election Day was approaching, there was this sense that it could be a blue sweep,” Stevens said. “The fact that we are probably looking at a split Congress is a big deal because that takes major tax reform off the table.”
Despite some reasons for optimism, local experts acknowledged there are a variety of factors that could slow economic growth.
President Donald Trump, who has yet to concede his race, has repeated claims of election fraud, demanded recounts and launched litigation efforts in multiple states.
An atypical transfer of power could dampen the economic boost that normally comes with it, according to Rice.
Meanwhile, there are signs that the economic recovery is not following a straight, upward path. Iowa recently reported an increase in new unemployment claims for the third consecutive week.
Munshower said it is common for recoveries to ebb and flow. However, he said the economic woes of 2020 have been unlike downturns of the past.
“As much as this has been a bizarre year, it has also been a bizarre recession,” Munshower said. “Typically, male unemployment goes up way more than female unemployment (in a recession). This time, new unemployment is heavily concentrated with females.”
This is due to the pandemic’s disproportionate impact on service-based operations such as restaurants and retail stores, which employ a high number of women. Typical recessions usually hit male-dominated industries such as construction and manufacturing.
As winter approaches, it remains to be seen whether the post-election optimism will remain. At a time when COVID-19 cases continue to surge locally, economic experts struggle to envision a sustainable economic recovery.
“We need to find short- and long-term solutions for the pandemic before we can have economic prosperity,” said Rice.