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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.)

Kaine, Collins' censure resolution seeks to bar Trump from holding office again

Sen. Tim Kaine (center) and Sen. Susan Collins (right). Photo: Andrew Harnik/Pool via Getty Images

Sens. Tim Kaine (D-Va.) and Susan Collins (R-Maine) are forging ahead with a draft proposal to censure former President Trump, and are considering introducing the resolution on the Senate floor next week.

Why it matters: Senators are looking for a way to condemn Trump on the record as it becomes increasingly unlikely Democrats will obtain the 17 Republican votes needed to gain a conviction, Axios Alayna Treene writes. "I think it’s important for the Senate's leadership to understand that there are alternatives," Kaine told CNN on Wednesday.

Stark reminder for America's corporate leaders

Rosalind "Roz" Brewer is about to become only the second Black woman to permanently lead a Fortune 500 company. She starts as Walgreens CEO on March 15.

Why it matters: It's a stark reminder of how far corporate America's top decision-makers have to go during an unprecedented push by politicians, employees and even a stock exchange to diversify their top ranks.