The US election could produce one of 5 distinct outcomes for a stimulus bill, according to a macro investment strategist

The US election could produce one of 5 distinct outcomes for a stimulus bill, according to a macro investment strategist
A political gridlock, where Biden wins the White House but fails to win Senate majority, could see only $500 billion in stimulus next year.Jim Bourg-Pool/Getty Images
  • To get Democrats and Republicans back to the stimulus negotiating table, there needs to be agreement on the election outcome. An agreement is more likely if either side secures a big margin of victory. Based on current polls, the most likely scenario is a so-called blue wave favoring Democrats.
  • The US election could produce one of 5 distinct outcomes for a stimulus bill, according to Dominique Dwor-Frecaut, a macro strategist at Macro Hive.
  • A blue White House and a blue Senate is considered the most likely scenario. A blue-wave early-agreement scenario (60% probability) could see a small amount of relief spending in the fourth quarter. The reason, according to Dwor-Frecaut, is that Republicans would rationalize their loss by signing off on the $500 billion offered in September. Democrats would agree, the theory goes, with the idea of providing heftier legislation in February after the inauguration.
  • A blue White House and a red Senate is considered the second-most-likely scenario. That would mean the $500 billion stimulus plan could pass this year. Democrats would have to swallow the defeat of their strategy and sign off on the "skinny" GOP plan. The White House would push for more spending in February, but the Senate may not agree to anything over $500 billion.
  • Another likelihood of a gridlock outcome, in which Biden wins the White House but fails to win Senate majority, is that the $500 billion stimulus could only pass next year. This electoral outcome would be a repeat of the 2010 mid-term elections, in which Republicans won control of the House.
  • A status quo outcome, in which Trump retains both the White House and the Senate, is considered likely by a short margin. Stimulus can be expected only next year in this case. But Trump, who likes to spend, would be able to push Senate Republicans to raise their offer, so $1 trillion in stimulus would be possible next year.
  • If polls are wrong and prediction markets right, results would be tight. In that case, there could be a contentious postelection period in which the US would see state-by-state disputes over the results. Discussions on a new package are highly unlikely.
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