Stocks Fluctuate as Elections Get Underway: Live Updates

The global economy faces a subdued recovery in 2021 as countries race to roll out coronavirus vaccines and businesses around the world try to emerge from pandemic lockdowns that have widened income inequality and piled on debt, the World Bank said on Tuesday.

The global economy will expand 4 percent in 2021 after contracting 4.3 percent last year, the World Bank projected in its Global Economic Prospects report. The bank described the nascent recovery as “fragile” and said that its trajectory would depend on the success of widespread vaccine distribution.

“While the global economy appears to have entered a subdued recovery, policymakers face formidable challenges — in public health, debt management, budget policies, central banking and structural reforms — as they try to ensure that this still fragile global recovery gains traction and sets a foundation for robust growth,” said David Malpass, the World Bank’s president.

• The bank projects that advanced economies will expand 3.3 percent this year after contracting 5.4 percent in 2020.

• Developing economies are projected to expand 5 percent after shrinking by 2.6 percent last year.

• The United States economy is expected to expand 3.5 percent this year, while in China, where the virus first emerged, the economy is projected to expand 7.9 percent.

The forecasts are based on the assumption that the rollout of the vaccine will be widespread by the middle of the year. However, if logistical problems arise or if people resist vaccinations, the global economy could expand at a much slower rate of 1.6 percent, the World Bank said.

The pandemic has cast millions of people into poverty as governments locked down their countries to contain the virus. As many as 150 million people are expected to be pushed into extreme poverty by this year, the World Bank said in October.

Policymakers will need to take steps to reverse the devastating increase in extreme poverty, Mr. Malpass said in a briefing on Tuesday. “It may take years for people at the bottom of the income scale to see a sustained improvement in their circumstances,” he said.

The World Bank has $12 billion to help countries coordinate vaccine distribution. The world economy faces an “Amber Alert” when it came to debt, Mr. Malpass said, and the bank will be working to help poor countries ease their debt burdens so that they can focus their resources on health care needs.

For the past two months, Wall Street’s investors have found comfort in the idea that the government was heading for gridlock, with Democrats controlling the White House and Republicans in the majority at the Senate.

It’s a view that highlights Wall Street’s preference for the low-tax, low-regulation policies championed by the Republican Party. President-elect Joseph R. Biden Jr. is expected to push for more spending on infrastructure and more support for the economy, but without the Senate’s backing, he wouldn’t be able to reverse the Trump tax cuts have been a boon to corporate profits or enact major laws that increase regulation.

That consensus helped bolster stocks late last year, adding to the rally that lifted the S&P 500 to a record.

But there’s one more threshold to cross before investors can be sure of that outcome.

On Tuesday, two Democratic Senate candidates — Jon Ossoff and the Rev. Raphael Warnock — are challenging two Republican incumbent senators — David Perdue and Kelly Loeffler — in a runoff. If both Democrats win, the party will take control of the upper chamber of Congress. (Democrats already have control of the House of Representatives.)

In recent days, analysts and traders have fixated on polling data and prediction markets that show a growing chance that the race could be closer than expected.

That Democrats could in fact win was one factor behind Monday’s 1.5 percent drop in the S&P 500, the index’s steepest daily decline since the days before the election.

At the same time, the economic crisis caused by the pandemic has scrambled the usual political calculus for investors.

On Wall Street, it’s generally agreed upon that Democratic control of the Senate could lead to a large amount of deficit spending in the early days of the Biden administration, a potential boon to the still-struggling American economy.

“A unified Democratic government will have broad leeway on fiscal policy, and in the current economic environment, unified Democratic government will mean more stimulus,” economists with Mizuho Securities wrote in a note to…