The Biden presidency can also reverse much of Trump’s work on the environment via executive action. Anyone who was hoping for an impulse for alternative energy should be happy. As for doubts over the incoming administration’s attitude toward fracking, the current price of crude oil, hovering around $40 per barrel, renders them moot. Prices at that level are going to be terrible for the U.S. oil industry whoever is president. The fly in the ointment is that much good news is already in the price, particularly for solar energy:

Most importantly, the Trump approach to dealing with Covid-19 has been close to indefensible. Consistency and discipline are necessary until a vaccine is available — and will also be vital for making sure the vaccine reaches people quickly. The Biden team has already given word of the group of advisers he is appointing to guide his Covid-19 strategy, to be headed by the former surgeon-general Vivek Murthy, and including Obama administration health adviser Ezekiel Emanuel. They have a body of work that can be reviewed. A more competent handling of the pandemic won’t eliminate risk, and won’t turn the U.S. into Germany, but it should at least reduce market jitters.

A final point is that Biden in these circumstances is going to appoint a treasury secretary with whom the market is comfortable (Elizabeth Warren wouldn’t be confirmed by the Senate, and so won’t be nominated), and he isn’t going to pick anyone from the far fringes to serve on the Federal Reserve, as Trump has done. If, as is widely speculated, the treasury job goes to Lael Brainard, currently a Fed governor, there should be a return to joined-up monetary and fiscal strategy, which could be vital if the winter wave of the virus causes another serious dip in economic activity. If any eyes roll at the prospect of yet more of the policies that have dragged on for more than a decade now, bear in mind that they have worked out really well for markets. 

The Bearish Case
This is likely to be an unusually short honeymoon, because:

• Although Trump won’t have presidential power for the next four years, he will still have very real political power, and can be expected to use it. He will be a pain, and lead a large and obstructive opposition.

• Biden, given his age, is expected to be a one-term president. Politicking to replace him is already under way.

• The Republicans have a very strong chance of taking back control of the House in two years. (This isn’t just because presidents tend to suffer a big mid-term swing against them; it’s also because there will be re-districting after the completion of the U.S. census.)

• The Senate is also very probably up for grabs in 2022. Expect a repeat of the past week’s dramas, as Republican senators plan to retire in North Carolina and Pennsylvania, while the winner of January’s Georgia special election will also have to defend in 2022. Republican seats are also up for re-election in Wisconsin and Florida.

• Recriminations among Democrats are likely. A few more firebrand progressives were elected to the House, while a number of moderates were ousted.

• The Supreme Court could force the issue of healthcare, on which there is minimal chance of compromise between presidency and Senate, if it rules Obamacare unconstitutional. Beyond causing a big political mess, and risking unrest, it could also cause economic problems if and when people lose coverage.