Illustration: Eniola Odetunde/Axios

We're 40 days away from the election, which means we're between 40 and 80 days away from knowing who won the election.

What happens next: The stock markets, which have spent most of 2020 divorced from the real economy, may tank — setting up a chain reaction that could impact everything from high-profile IPOs (e.g., Airbnb) to private market fundraising (denominator effect) to pending mergers (Delaware Chancery Courtnip).

Scenario: Current polling suggests the likelihood of a President Biden and decent odds of a Democrat-controlled Senate.

  • Biden's economic plan includes a partial repeal of the 2017 tax cuts, plus an elimination of preferential treatment for capital gains for those making over $1 million per year. It also would repeal the 2017 income tax cut for those earning more than $400,000 annually, effectively doubling what some currently pay on capital gains.
  • Those proposed changes could spark a massive sell-off, with wealthy investors seeking to lock in 2020 gains at a much lower tax rate.
  • It's possible that Biden and Democrats wouldn't immediately pursue new tax policy, given that we're in the midst of a recession, or that changes wouldn't apply to 2021 earnings. But investors won't know for sure come Nov. 4. Or Nov. 24.

To be clear: This isn't an argument for or against the sagacity of Biden's tax policy. It's just hypothesizing short-term impacts.

  • Downside: Outside of the downstream issues for deal-makers, Axios Markets editor Dion Rabouin makes a compelling "wealth effect" argument that stock market performance has been psychologically valuable during the pandemic (even for those without direct market exposure).
  • Upside: This artificial optimism is a big reason why Congress has been unwilling to work out a new economic stimulus. Remove it, and the market's loss could lead to desperately needed help for small businesses, consumers, schools, etc.

Wildcards: President Trump certainly could win re-election, thus negating all of the above. Plus, there's the possibility of near-term vaccine approval and distribution, which should have a much more significant economic impact than would tax policy.

The bottom line: Elections have consequences.

Editor's note: An earlier version of this story misstated the income threshold at which Biden has proposed changing capital gains rates.

Go deeper

Dan Primack, author of Pro Rata
Updated Oct 15, 2020 - Economy & Business

McConnell says he will not put $1.8 trillion stimulus bill on Senate floor

Illustration: Aïda Amer/Axios

The stimulus negotiations are beginning to remind me of running on a treadmill — lots of effort, no forward motion.

Driving the news: Senate Majority Leader Mitch McConnell (R-Ky.) said Thursday that he would not put a potential $1.8 trillion+ deal struck by Democrats and the Trump administration on the Senate floor. "My members think half a trillion dollars, highly targeted is the best way to go," he said.

Dion Rabouin, author of Markets
Oct 15, 2020 - Politics & Policy

Wall Street certainty grows as polls show Biden with sizeable lead

Adapted from Deutsche Bank using Real Clear Politics and Gallup polling data; Chart: Axios Visuals

The U.S. presidential election is 19 days away and investors are growing increasingly certain of a Joe Biden victory, as the former vice president has maintained and added to his sizable lead over President Trump in national polling and betting odds.

What's happening: Biden's edge recently rose above 10 percentage points, according to polling averages from FiveThirtyEight and Real Clear Politics, an important milestone.

The cliffhanger could be ... Georgia

Illustration: Sarah Grillo/Axios

It hasn't backed a Democrat for president since 1992, but Georgia's changing demographics may prove pivotal this year — not only to Trump v. Biden, but also to whether Democrats take control of the Senate.

Why it matters: If the fate of the Senate did hinge on Georgia, it might be January before we know the outcome. Meanwhile, voters' understanding of this power in the final days of the election could juice turnout enough to impact presidential results.