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Harrison’s defeat stung Jones on a personal level, and yet, professionally, the blue wave that didn’t occur was, he said, an ideal outcome for stock watchers, at least in the near term. Indeed, if Joe Biden is to be the next U.S. president, he will likely need to make nice with what could be a Republican-controlled Senate to get anything done.
“Having the Republicans in control of the Senate is kind of the best scenario,” Jones said. “You are going to have a bit of a gridlock, and there is not a clear mandate, and so nothing radical is going to happen.”
What could happen to the stock market is another story, however. Jones predicts a period of slow growth, accelerating inflation and a U.S. dollar made weak by monetary stimulus. A weak dollar is great for commodities, real estate, gold prices and, typically, the stock market.
But over the longer haul, into the second half of next year and beyond, a weak dollar could trigger runaway inflation. On top of that risk are the job numbers south of the border. They have improved, but unemployment still remains at 6.9 per cent, and unemployment is one of those things that eventually comes “home to roost,” Jones said.
Persistent unemployment, soaring inflation and American households barely getting by is bad enough, but then also toss in a global pandemic with no fixed end date. Several European countries are entering or are already in another round of lockdowns. The U.S. is more chaotic, and complex, with COVID-19-limiting measures differing from state to state. But, in general, the more prevalent the virus, the worse off the economy.