Markets Shrug Off Trump-Biden Transition Chaos, Turn Attention to Georgia Senate Elections

As Republicans escalate their efforts to challenge Democratic president-elect Joe Biden's victory, markets are cautiously optimistic for what the future holds.

While investors have weighed the possibility of a potentially disorderly transfer of power, compared to what they have already weathered in 2020, some analysts feel the potential legal challenges brought by outgoing President Donald Trump and his team are unlikely to stick.

Attention is turning from potential election chaos, to the potential outcomes of the Georgia senate race taking place in January.

As the balance of power in the Senate is now at a near tie for Democrats and Republicans, the two runoffs in Georgia could define the Senate majority or a possible split come January.

"The risk of serious constitutional crisis or what you might call a disorderly transition is being viewed as a tail-risk for markets. So it's not really front of mind and driving action," Ranko Berich, head of market analysis at Monex Europe, told Newsweek.

"At this point, if you look at most of the institutions of the U.S., it doesn't look as though Trump's challenges are likely to succeed at this point.

"Right now markets are trading off the reality of a Biden administration that's tempered by a possible Republican Senate."

Berich notes that we don't currently know what the trajectory of fiscal policy is going to be in the U.S. due to the fact the makeup of the Senate still hasn't been decided, a fact that is in itself driving volatility in both currencies and equity markets.

Although Biden made a victory speech on Saturday night and several leaders around the world have congratulated the Democrat on his win, Trump has yet to concede the election. The Constitution does not require a candidate to concede an election, but Trump would be the first president not to do so.

Instead, Trump has since made baseless claims of widespread voter fraud.

These messages have been echoed by his Republican counterparts. Yesterday, U.S. Attorney General William Barr authorized federal prosecutors to investigate allegations of voting irregularities, bypassing the Department of Justice's long-standing policy that prohibits such actions before an election is certified.

"The more noise Trump makes the more helpless he probably is, because ultimately unless he can reverse Pennsylvania it's not going to really matter if he turns around Georgia or Arizona," Michael Hewson, chief market analyst at CMC Markets told Newsweek.

"The biggest concern investors have at the moment is that Trump could make life a little bit difficult. No more or less than he's made life difficult for people over the past few years."

Hewson notes that the biggest game-changer for markets is likely to be the prospect of a COVID-19 vaccine. That will determine—in part— future fiscal paths of any government due to the effect it could have on the economy.