For months, investors have signaled that their No. 1 desire is more federal spending to keep the economy afloat in the face a pandemic that is now rapidly expanding.
So when the election season culminates on Tuesday, the prospects for a stimulus bill are likely to influence how Wall Street reacts.
With that in mind, here are four electoral outcomes and how investors might view them.
The Blue Wave
The potential for this result — with former Vice President Joseph R. Biden Jr. winning the presidency decisively and his fellow Democrats taking control of the Senate — fueled a short stock market rally in late September and early October.
The narrative was simple: If Democrats hold all the cards, the spending will be big.
Should it happen, stocks will probably rise along with expectations for economic growth. The impact will be evident in other markets, too: Long-term interest rates would rise, and the dollar would fall as investors bet on larger federal deficits and slightly higher risks of inflation.
Asterisks abound however. A blue wave also promises more legislation on taxes or regulation, so analysts think a thin Democratic majority in the Senate — the so-called light blue wave — that leaves some limits on the Democratic agenda might be a slightly better outcome for investors.
Return of the Red Senate
Conventional wisdom on Wall Street is that Washington gridlock is usually best for stocks, because it means the government is unlikely to do anything that hurts corporate profits.
But the coronavirus crisis and ensuing economic slump have prompted some soul-searching on this point, and many Wall Street analysts see a split decision on Tuesday — with Republicans retaining control of the Senate and Mr. Biden taking the White House — as potentially the worst outcome for financial markets that are hanging their hope on a stimulus bill.
“A Biden win with a Republican-controlled Senate would likely lead to much less fiscal stimulus, little public investment and no major tax changes,” analysts with the money management giant BlackRock wrote in a recent note.
Another Trump Triumph
Pollsters are putting a high probability on a Biden victory, but it is still possible that President Trump will win re-election.
It would most likely mean the Republicans also retain control of the Senate, while Democrats almost certainly still control the House of Representatives.
In short, nothing will have changed in the standoff over how much spending to authorize, and optimism about another large-scale near-term stimulus package could quickly evaporate.
On the flip side, though, a second Trump term would ensure that taxes on companies or the wealthy won’t be rising. Plus, Mr. Trump could replace the Federal Reserve chair, Jerome H. Powell, with someone who is much more in tune with the president’s preferred monetary-policy posture and something stock investors might love: low interest rates forever.
The Uncertain Outcome
A vote that is so close in certain key swing states that the outcome hangs on litigation that will ultimately be resolved by the Supreme Court will be trouble for investors.
Even if Mr. Biden wins the election, President Trump has suggested on multiple occasions that he might not accept the outcome.
If Mr. Trump doesn’t concede, it’s hard to know when this fraught election season will end. In such an environment, there won’t be any progress on a stimulus deal, most likely delaying the arrival of any more help for the economy.
In other words, uncertainty that has weighed on markets in recent weeks will probably be projected out for the foreseeable future. That means the stock market would be in for another rocky ride until it’s clear who will lead the federal government for the next four years.
No matter who is elected, the next president will face an economy that is still reeling after the shutdowns last spring. Some areas have bounced back, but others remain deeply depressed, and millions of Americans are still out of work.
Saudi Aramco, the world’s largest oil company, said on Tuesday that its net income for the third quarter was $11.8 billion, about 45 percent lower than the period a year earlier. But compared with the second quarter, when oil prices crashed because of the effects of the coronavirus pandemic, the state-controlled company’s earnings improved nearly 80 percent.
“We saw early signs of a recovery,” Amin H. Nasser, Saudi Aramco’s chief executive, said in a statement. He also said that the global energy markets were facing “headwinds.”
Despite the lower earnings, the company said it would stick to its commitment to pay a hefty $18.75 billion quarterly dividend. The payout is substantially larger than the $12.4 billion cash flow for the quarter, meaning that the company is effectively borrowing to pay it, analysts say.
The company pledged to pay a $75 billion a year dividend during the prelude to its initial public offering last year. Most of the money goes to the Saudi government, which owns about 98 percent of the company.
Oil prices have come under renewed pressure in recent days as new lockdowns in countries such as Britain, France and Germany threaten the economic recovery and reduce fuel consumption.
With Election Day imminent, a prominent Texas business leader last week appeared to urge her employees to consider voting for Donald J. Trump and other Republican candidates.
Barbara R. Smith, chief executive of the Commercial Metals Company, a manufacturer in Irving, Texas, suggested on Thursday in a memo to workers that a Democratic president and Senate could diminish the company’s future earnings by $200 million a year.
“There are sharp differences between the two candidates’ approaches toward the economy, trade, national security and entitlements,” she wrote, adding, “I urge you to consider each party’s platform and its impact on this great company you have helped to build.”
The memo, a copy of which was reviewed by The New York Times, was distributed to thousands of Commercial Metals employees around the United States, according to one recipient.
The memo left some Commercial Metals employees uncomfortable, according to two people with knowledge of the reactions, leading Ms. Smith to clarify her intentions, one of them added.
In a follow-up note to employees on Monday, Ms. Smith told employees that “the candidates you vote for and the policies you support are entirely your own business, but whatever your political beliefs, what is most important is that you vote.”
In the original memo, Ms. Smith wrote that the company’s government affairs experts had reviewed the possible impact of various election outcomes, and found that a “unified government” scenario — involving a Democrat in the White House and at least three additional Democratic seats in the Senate — could lead to an increase in corporate taxes of up to 35 percent, a pivot to greener industries that could harm metals manufacturers and a removal of Trump-era tariffs that have benefited U.S. steel and aluminum companies. Those actions, taken together, could hurt the company’s bottom line, the analysis found.
Joseph R. Biden Jr. has said that if he were to win the presidency, he would push for an increase in corporate taxes to 28 percent from their current level of 21 percent under Mr. Trump. While Mr. Biden has embraced the idea of spending government money on renewable energy and has criticized Mr. Trump’s tariff policies for alienating allies, he has not taken clear positions on either a carbon tax or tariff reforms.
Voters across the country are weighing in Tuesday on dozens of ballot initiatives. At a time of sharp economic inequalities, a number of the proposals bend toward a progressive view of taxes, with higher rates for companies and wealthy individuals.
Here are the ballot initiatives related to business and economics that we’re watching:
California’s Proposition 22 would allow ride-share and delivery companies to classify drivers as contractors, not employees.
California’s Proposition 15 would amend the state’s Constitution to raise billions of dollars for schools and local governments by lifting the protections for commercial property owners enshrined in a landmark 1978 ballot initiative.
California’s Proposition 21 would allow cities to enact rent control measures on almost all rental housing that’s more than 15 years old.
Florida’s Amendment 2 would increase the state minimum wage to $15 in 2026 from $8.56 in 2020.
Illinois’ Allow for Graduated Income Tax amendment would replace the state’s flat income tax of 4.95 percent with graduated taxes that would range from 4.75 percent to 7.99 percent.
Arizona’s Proposition 208 would tax higher-income taxpayers to funnel money into public schools. It would allow an income tax surcharge of 3.5 percent on single filers making above $250,000 and joint filers earning more than $500,000 in addition to the existing 4.5 percent income tax.