Wall Street takes what it can get

Roger Altman is confounded. "I'm rather amazed by the markets," the founder of the investment firm Evercore told CNBC on Wednesday. The 74-year-old said after the start of trading that markets had hoped for a Biden victory and with it, a strong stimulus package. "Now this morning, the markets are rallying apparently on the prospects of a divided government," he said.

Altman is not the only one watching on in amazement. Many experts who believed that US investors required a "blue wave" sweep of Democrat victories were taught a lesson on Wednesday. Although the Democrats' fancied landslide did not materialize, markets celebrated as if it had. The Dow Jones gained 2.9%, achieving the strongest post-election performance in 120 years.

"It appears investors may be satisfied with at least half a loaf," wrote Barry Bannister, head of Institutional Equity Strategy at the financial services provider Stifel, referring to the possibility of Biden winning the presidency and Republicans winning the Senate.

Above all, an increase in capital gains tax feared by investors is now off the table, now that the Senate remains firmly in the hands of the Republicans. The prospect of a comprehensive stimulus package is also lower, which could jeopardize an economic recovery. "Markets have a 'Fed put' if fiscal assistance is slower in coming," he wrote.

A house divided stands on Wall Street

Fears that Biden may toughen regulation of US tech giants in the event of victory would fade with a mixed Congress. That helps explain why tech stocks have been booming. Shares in Facebook and Google parent Alphabet had gained 8% and 6% by the end of trading. In the end, the Nasdaq Composite technology exchange was up 4%, making it stronger than ever on the day after a US election.

By contrast, cyclical stocks and value stocks came under significantly more pressure on Wednesday. They suffered from the dwindling likelihood of a strong stimulus package. Industrial and materials stocks — which would have benefited from the Democrats winning both Houses of Congress and the prospect of Biden's infrastructure program, also failed to hold up. In addition, America's utilities and banks ended in the red on Wednesday.

In the eyes of Wall Street, however, an election decision as quickly as possible is likely to be even more important than what the majority in Congress is. Biden is edging toward victory. Experts say that even a supposedly clear result is far from being the trigger for a stock market rally.

"A lot of investors think [the election} will be wrapped up in a couple of days," Arian Vojdani, investment strategist at MV Financial, told Reuters. "Increased uncertainties such as potential court cases around the election could throw a wrench in the current market optimism," he cautioned.

2000 election provides a lesson

The 2000 US presidential election showed that Wall Street can be turbulent when results are contested. For five weeks, presidential candidates George W.Bush and Al Gore fought for key votes in the state of Florida. Even when the US Supreme Court gave victory to Bush, there was no letup. By the end of 2000, the S&P had fallen 8% and the Nasdaq by 20%.

In the long run, the markets should benefit regardless of who wins the White House and when. "History suggests that a president's party affiliation has made little difference when it comes to long-term returns," Chao Ma, wealth strategist at Wells Fargo, told CNBC. The state of the economy and the profits of US companies are much more important drivers than the party in the White House. "We expect that to continue to be the case beyond the 2020 elections," he said.

Adapted from German by Arthur Sullivan