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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

What we're watching in 2021

Illustration: Sarah Grillo/Axios

A new phase in the battle against the coronavirus and the beginning of Joe Biden's presidency will dominate the news this year, but there will be plenty of other changes ahead that will shape our lives, too.

  • Here’s what Axios’ newsletter authors and expert reporters will be watching — from the future of the economy and Big Tech's antitrust fights to the next stages in developing artificial intelligence and biotechnology. (Sign up for their newsletters here.)
47 mins ago - World

Pope Francis denounces European governments' migrant response

Pope Francis adresses refugees at the Reception and Identification Centre (RIC) in Mytilene on the island of Lesbos on Sunday. Photo: Louisa Gouliamaki/Pool/AFP via Getty Images

Pope Francis criticized European countries' response to migrants and asylum seekers during his visit to a refugee camp on the Greek island of Lesbos Sunday.

Why it matters: The pope said "migration is a humanitarian crisis that concerns everyone," but little had changed in the global response to displaced peoples since his first visit to Lesbos five years ago, per a transcript of his remarks. "Human lives, real people, are at stake. ... let us stop this shipwreck of civilization!"

Chris Cuomo accuser: On-air "hypocrisy" spurred report

Journalist Chris Cuomo. Photo: Gilbert Carrasquillo/GC Images

A woman who accused fired CNN journalist Chris Cuomo of sexual misconduct said Sunday she decided to come forward after learning of his comments about women who made similar accusations about his brother. He denies her allegations.

Why it matters: Her attorney Debra Katz said in a statement that she heard "the hypocrisy" of his on-air words about his brother, former New York Gov. Andrew Cuomo, and was "disgusted by his efforts to try to discredit these women," so "retained counsel to report his serious sexual misconduct against her to CNN."