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10 Nov 2020 – Insights

Long and winding road ahead for Joe Biden

Joe Biden has won the US presidential election but neither democrats nor republicans can yet claim a majority in the senate. If republicans maintain their current senate majority, Biden will have a hard time getting his policies through congress, and his challenges ahead are already mounting.

Supporters and sympathisers took to the streets on Saturday cherishing the news that Joe Biden had won the election but the economic reality awaiting the new president is nothing much to cherish.


Billede: Msnbc/Zuma/Ritzau Scanpix 

”First of all, we are now seeing a third wave of rising COVID-19 infection numbers, which are now around 100,000 a day in the US. Hospital admissions are already on a sharp increase and mortalities also starts ticking upwards. Joe Biden has made clear that he will address COVID-19 fundamentally diffierent from Donald Trump but the question is how much he can actually achieve when so many initiatives are taken at state level”, says senior analyst at Danske Bank, Mikael Milhøj.

“And secondly, the is still in the midst of an economic crisis”, he continues.

”Although the US economy is now in better shape than in April, when economic activity had fallen off a cliff, private consumption is still 2.6% lower than in February. This is in line with the decline at the worst point during the financial crisis, which until COVID-19 was the worst crisis since the great depression. We also see the crisis in employment numbers with around ten million fewer jobs than in February”, says Mikael Milhøj.


A fiscal stimulus package could offer the economy a helping hand, which would be welcomed on the financial markets. With no new stimulus package there is a higher risk that the current pandemic induced recession leads to a recession in more traditional terms with huge income losses for the unemployed and with more companies going out of business.

Mikael Milhøj

Senior analyst, Danske Bank



Fiscal stimulus package 
The dire economic reality means that negotiating a fiscal stimulus package will be a main priority for Joe Biden after inaugation in January but getting any such stimulus package through congress will depend on the final composition of the senate where it is still unclear if the democratic party can secure a majority. This will be settled after senate re-elections in Georgia on 5 January, Mikel Milhøj explains. 

”Georgia has traditionally voted republican, and it is unlikely to be easy for democrats to win both seats up for reelection, so there is a risk that we will see a continuation of the situation of the past 30 years with one party blocking the policy proposals of the other. A fiscal stimulus package could offer the economy a helping hand, which would be welcomed on the financial markets. With no new stimulus package there is a higher risk that the current pandemic induced recession leads to a recession in more traditional terms with huge income losses for the unemployed and with more companies going out of business”, says Mikael Milhøj.

Easing the trade conflict with China 
A republican controlled senate will also make it difficult for Joe Biden to increase taxes and minimum wages and to secure funding for infrastructure investments or a green transition, but the president would have more executive power with regard to trade and foreign affairs. Mikael Milhøj expects relations between US and Europa to improve and that the trade conflict with China will be deescalated, although Biden has vowed to keep pressure on China. Improved relations with traditional allies could help him isolate China politically, says Mikael Milhøj.
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