The political – and legal – wrangling over the messiest US election since 2000 may not have subsided, but the markets appear to have coalesced around a consensus view of what happens next: Joe Biden will take his place in the White House on January 20th and, barring a shock result in January’s run-off elections in Georgia, will have a Republican-run Senate to contend with.

After weeks of anxiety in the lead up to the election, the outcome has already significantly reduced market volatility and fueled risk appetite. While some uncertainty remains, particularly as President Trump refuses to concede and pledges to fight the result in the courts, the political risk within the United States has greatly receded.

Looking ahead to the next four years, equity markets are already seeing positives in the result. The expected make-up of Congress, denying Biden and the Democrats control of the Senate, has put paid to the possibility of the new administration pursuing some of its more aggressive, anti-business policies, such as imposing higher corporate tax rates. A market-friendly infrastructure plan, on the other hand, where areas of bipartisan agreement exist, may yet pass.

Optimism is tempered, however, by the prospect of continued political deadlock over fiscal policy measures to support the US recovery and induce much-needed private consumption. Jay Powell’s pleadings for Washington to agree a stimulus package may continue to fall on deaf ears for months longer.

Overall, the prospect of a Biden presidency moderated by a Republican senate, coupled with strong Q3 earnings reports in the US, is a source of reassuring positivity for equity markets. History shows that the 12 months following an election are generally positive for equity markets, regardless of who is in charge. The truth is that global events, far more so than events in the US capital, will shape the market outlook in the months and years ahead.