The chance of a government with a much more coordinated approach to economic recovery from the pandemic has been reduced substantially

With the election result still up in the air, potentially for days to come, one thing investors had hoped for can now be all but ruled out: a coordinated and consistent economic policy from Washington.
In the grand scheme of things, market moves this time havent been colossal, but they have been telling, especially in the bond market.
In 2016, an equity selloff was the widespread consensus reaction to a Trump victory, which was upturned in a matter of a few hours as investors realized the mathematics of the races would allow for ambitious corporate-tax cuts. But if the equity market told the story of the 2016 election, it is the U.S. Treasury market thats singing now: 10-year yields rose to as high as 0.94% shortly after polls closed on the East Coast. As it became obvious that some form of divided government is far more likely than polls had implied, yields tumbled back to as low as 0.78%.
The most likely outcomes now are a Democratic president dealing with a Republican Senate, or a Republican president dealing with a Democratic House of Representatives. The latter has failed to produce a second round of stimulus to help the U.S. recover from the pandemic. The former is not any more promising.
Just as financial markets are amoral, they are also apolitical. A narrative could easily have been constructed for a positive market reaction if either party won a clean sweep across both houses and the presidency. With the level of rancor between the two parties, any form of split result is difficult to see optimistically. The narrow path to surprise outcomes hasnt closed yet, and the possibility of unified government shouldnt be entirely scotched, but results so close and contentious could easily produce long disputes in the courts.