Joe Biden’s announcement that he won a presidential election and the active support of this fact by the media led, as I expected, to a surge in demand for risky assets, crude oil price and continued weakening of the US dollar in the foreign exchange market.
What is the reason for such market behavior?
Investors decided that the democratic candidate won the presidential election. Democrat’s attitude towards the economic model is significantly different from Donald Trump’s, who wanted to revive the national commodity producer. He sought to force global companies to move their production from Asia and other regions of the World back to America, which caused Washington’s “war” against Beijing, which caused significant damage to the world economy.
Now the markets believe that everything will return to normal and be like under Obama and his predecessors. To put it simply, the dollar was exported as a financial asset. China and other countries were fully involved in the American production cycle.
Therefore, assessing the prospects for financial markets, I believe that the stock markets’ rally will continue this week. As a result, the US dollar will remain under pressure. The demand for company shares and other assets is the main reason for this dynamic. The dollar will continue to experience growth challenges due to the widespread stimulus programs that make its supply significant in the financial system. In addition, investors expect new support measures, which were announced by the speaker of the lower house of Congress Democrat Nancy Pelosi before the elections, and which seems to be adopted. It will put additional pressure on the US dollar and support speculative demand in stock markets in America, Europe and Asia.
What to expect soon
Time will tell what the confrontation between Biden and the current president will lead to since the 45th president does not recognize the victory of the democratic candidate. But so far, the markets are not thinking about it, putting it off for later, which in my opinion, may stimulate the weakness of the dollar and the increased demand for company shares in the short term.