Stock markets moved higher on Wednesday even as investors digested results of a U.S. election that remained too close to call.
U.S. stock indexes including the S&P 500 and the Dow Jones Industrial Average were both up almost two per cent and the technology-focused Nasdaq fared even better.
Shares in large tech companies such as Amazon, Facebook, Adobe, Apple, and Google were all up by more than five per cent. That’s largely because those companies have fared well during the pandemic, and are likely to continue to see strong demand for their services no matter who is in the White House.
The TSX was a little more muted, with the main index up about 100 points or half a per cent. Energy companies and financial firms gained ground, while most other sectors lost ground.
One sector of the TSX that was a clear loser on the day was cannabis stocks, which saw something of a mixed bag in the results. On the upside, four more states voted to legalize recreational use of the drug with New Jersey, Arizona, Montana and South Dakota becoming the 12th, 13th, 14th and 15th states to do so.
But a Congress and White House divided across party lines is unlikely to see more drug liberalization laws come to pass anytime soon.
Shares in Canada’s two biggest cannabis companies, Canopy Growth and Aurora Cannabis, both lost about 10 per cent of their value.
Other sectors
Manulife’s chief investment strategist Philip Petursson said September and October during election years are typically bad months for the stock market, but November and December tend to be good. So Wednesday’s buying makes a lot of sense.
“Markets are already looking past the election to a continued recovery and favourable seasonality,” Petursson said. “Trying to gain an edge in the equity markets based upon potential or real election results is a greatly unrewarding exercise.”
While the winner of the presidential election is still unknown, it’s looking more and more clear that the expected Democratic sweep of all three branches of government is not happening, which means that more gridlock in Washington can be expected.
“There is now the prospect of a continuation of the status quo, with a Trump presidency and divided Congress,” said Keith Wade, chief economist with British money manager Schroders. “For now, no clear result is probably the worst possible outcome from an economic perspective as uncertainty increases and stimulus hopes fade.”
Colin Cieszynski, chief market strategist with SIA Wealth Management in Toronto, said that the vote is increasingly looking like the status quo. “If these results stand, the bottom line would be more of the same with no decisive changes and potentially even more gridlock due to the closer seat margins,” he said.
Stocks rose despite the vote increasingly looking like it will be contested and ultimately be decided by the courts. Regardless of Wednesday’s gains, that’s likely to weigh on markets for a while. “Basically, we are seeing a nightmare situation come true because now we are talking about legal battles,” said Naeem Aslam, analyst at Avatrade.com.