The US election failed to deliver a clear outcome on election night, and votes are still being tallied today. At the time of writing this, Biden had 248 electoral college votes versus 214 for Trump. It takes 270 electoral college votes to win and there are still 76 votes that are not yet decided, of which Biden is ahead in 22 and Trump is ahead in 54. In other words, it is extremely close – which is why both candidates are publicly acting confident that they will win. Even when the votes are tallied, there is bound to be many court and legislative challenges because every vote matter at this point. The implication is that the final outcome may not be known for some time.
Early this morning, it still looked like the Senate outcome was unclear, but over the course of the day it now looks increasingly likely that the Republicans will maintain their majority.
There had been concerns about social unrest during and in the wake of the election, but these fears did not come true, despite the record turnout at the polls.
Financial markets have taken the political uncertainty in stride, with equities posting solid gains. This suggests that investors are comfortable with a status quo outcome of a Trump White House and Republican Senate or a Biden White House constrained by a Republican Senate. The main financial market concern pre-election was the timing and scale of future fiscal stimulus to support the economy during the pandemic. As I have written before, Trump would likely put through a new fiscal stimulus package with Senate support after the election, but it would be more modest than what Biden would deliver. Trump’s package would like to be sooner. Biden’s package would be delayed by inauguration but would likely be larger. However, a Republican Senate would constrain Biden’s ability to deliver future tax hikes, increased regulation and environmental plans.
There will be significant Canadian and global implications from the final outcome, but we will tackle them when we know who the victor is. It should be stressed that the Government of Canada is prepared to engage effectively with whomever wins. A Biden Presidency would likely improve relations but not eliminate US protectionism. Meanwhile, Canada has managed to deal with the Trump administration in an effective manner over the past four years.
In other news, Canada’s international merchandise trade continued to recover in September but remained below pre-pandemic levels. Exports and imports rose 1.5 per cent during the month, bringing the trade deficit to $3.3 billion. In volume terms, which is key to measuring the contribution to economic growth, total exports increased by 1.2 per cent. Compared to September 2019, exports to all countries are down 7.4 per cent and imports are still down 3.3 per cent. With exports hovering between $44 and $46 billion for the past three months, there is no indication that the export recovery is gaining momentum. Indeed, the significant second wave of infection and its economic fallout in many Canadian export markets will act as a headwind on export growth in the fall and winter.
Canadian real estate continues to post new highs, but condo markets are starting to shift down into buyers territory. The latest real estate board data shows Toronto region post its fourth consecutive month of record sales. Demand for single detached homes is outstripping supply, which is driving up home prices. However, condo apartment sales are softening and listings have increased significantly. These trends of strong detached homes but a condo apartment correction are likely to persist in the coming months. The trends in Toronto are also apparent in Vancouver.
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