Following the results of last week’s US elections , the policy landscape is certain to be characterised by divided government in the next few years. Another way to describe it would be “steady as she goes, and don’t try anything too radical”. Instead of a “blue wave” where the Democratic Party won the White House, Senate and the House of Representatives, the election results were closer than polls suggested. The Democrats were unable to expand their majority in the House. The Senate will remain in Republican control if they can win at least one of the two run-off elections in Georgia on January 5. In the presidential race, the difference in votes between the two candidates in states such as Georgia , Wisconsin and Pennsylvania was thin. President-elect Joe Biden and sitting US President Donald Trump both received more than 70 million votes overall, more than any other presidential candidates in history, although Biden has 5.2 million more votes than Trump with ballots still being counted. The relatively close results have symbolic and practical implications as Biden plans for his administration. Symbolically, Republican politicians might argue that the Democrats do not have a strong mandate from voters to pursue their policies. Practically, a divided Congress means Biden will need to operate down the middle of the road to gain bipartisan support, which is challenging given the deep rift between the two parties. Biden’s cabinet appointments must be confirmed by the Senate, which Republicans are likely to control. Rejecting a nomination is rare, with the last rejection coming in 1989. An administration is more likely to withdraw a nomination if it is unlikely to be confirmed by the Senate to avoid embarrassment, especially for a president-elect. Biden will need to take this into account when selecting his cabinet. This would imply that politicians who advocate more radical policies are less likely to be considered. The same consideration would apply to Biden’s policy options, at least in the two years until the 2022 midterm elections when the Democrats have another chance at capturing the Senate. His policy platform during the campaign included higher tax rates for corporate and high-income earners, a higher minimum wage and continuing with health care reforms. Republican senators are expected to oppose these legislative changes. Hence, these bills will need to be made more bipartisan or wait until the Democrats have control of the Senate again. A more urgent issue is additional fiscal stimulus to support the US economy, which is facing continuing disruptions from Covid-19. A fresh stimulus package has already been delayed as the two parties failed to find common ground. The timing of the elections did not help to urge legislators to reach a compromise. The size of the package, stimulus payments and jobless benefits are all contentious points. However, since some of these financial support measures have already expired, the pandemic resurgence could push the economy – especially the service and hospitality industry – into another recession. Federal Reserve chair Jerome Powell warned in the central bank’s policy setting meeting last week that, “further support is likely to be needed to avoid further spread of the virus and help individuals who, with the expiration of the CARES Act payments, are seeing their savings dwindle”. A fiscal package should still come through eventually, but its size and coverage could be more limited. Biden has pledged to restore unity within the US, but he will face a challenge given the deep political divisions across the country. His top priority on Day 1 will be to lead the country through the pandemic, which will be the most important factor driving the US and global economy in 2021. Why a Biden presidency and divided Congress will boost Asian markets As the political fog clears and markets are starting to map out the policy outlook for 2021 and beyond, attention will shift back to the pandemic and its impact on the economy. Judging from markets’ reactions in the past week, the breakthrough in vaccine development has captured investors’ attention more than the rise in infections in the US and Europe. The expectation for the world gradually returning to normal could lead to a rotation of investors’ interests from the winners of 2020, like tech and health care, to laggards such as financials, travels and commodities. Tai Hui is chief market strategist for the Asia-Pacific at JP Morgan Asset Management