Text size
AFP via Getty Images
The blue wave that terrified tech stocks last September may have flooded Georgia on Tuesday.
If the two Democratic candidates triumphed in the crucial runoff elections to the Senate in Georgia, both the Houses of Congress and the White House would be under democratic control. Be prepared for such an outcome, futures on the
Nasdaq 100 Index,
dominated by giant tech stocks, were lower on Wednesday while the
S&P 500
had a lesser loss and the
Dow Jones industry average
was tight positive.
At the same time, government bond yields rose due to the increased prospect of more fiscal stimulus and even larger budget deficits. The 10-year benchmark mark reached the psychologically important 1% level for the first time since the market collapse caused by Covid in March last year.
The Associated Press named Democratic challenger Raphael Warnock the winner in his race against GOP Senator Kelly Loeffler, who was named Senate seat last year. Democrat Jon Ossoff narrowly led Senator David Perdue, the Republican who had served in the Senate for the past six years leading up to his term on Sunday. Georgian Foreign Minister Brad Raffensperger told CNN that 17,000 postal ballots from overseas and the military would not be counted until 5 p.m. on Friday
The betting markets heavily favored the Democrats’ victories according to the odds at choicebettingodds.com. Betting markets turned out to be more accurate than traditional polls in predicting the November elections, and financial markets appear to be betting oriented.
Should the Georgia Democrats win their respective races, their party would effectively control the Senate with 50 votes, tied with Vice President-elect Kamala Harris. With the Democrats in control of the House of Representatives, President-elect Joe Biden would find it much easier to pass his cabinet appointments and legislative agenda.
The latter is evidently a cause for concern in the financial markets. The greater likelihood of higher taxes and increased regulation from the Democrat-controlled presidency and Congress meant that trading in stock index futures was lower in the overnight session.
With the Democrats in control of the Senate, the chairs of the major committees could be taken over by progressives. As John Brady, executive director of global institutional sales at Chicago futures broker RJ O’Brien, notes, Bernie Sanders (D-Vt.) Would take over the Senate budget committee. Sherrod Brown (D-Ohio) would chair the Senate Banking Committee; Elizabeth Warren (D-Mass.) Would chair the subcommittee on financial institutions; and Ron Wyden (D-Ore.) would head the Senate Budget Committee and oversee tax law.
Nasdaq 100
Futures were down 1.4%, while those on the
S&P 500
were down 0.3% and
Dow Jones industry average
The futures were up 0.1%. The tech-heavy Nasdaq is seen as more prone to a reversal of Trump corporate tax cuts. Closer antitrust law and other regulatory controls by tech giants are a rare area of bipartisan agreements.
Financial markets favor divided governments, which tend to stall, rather than activist measures that could affect business. In particular, markets were optimistic about continuing Republican control of the Senate and curbing much of Biden’s agenda, including tax hikes, while providing spending programs popular on both sides of the aisle, such as infrastructure.
The surge in government bond yields would also weigh more heavily on larger tech stocks that trade at increased value for money. Sky-high valuations of fast-growing tech companies can be more easily justified with interest rates at historically low levels.
Positive for the markets would be the likelihood of another tax relief bill that would complement the bill passed late that year that made $ 600 checks available to most Americans. Biden, who campaigned for the Democratic Senate candidates on Monday, said her election would mean the Democrat-controlled Congress would make payments of $ 2,000, giving consumers an edge in light of the recent surge in Covid-19 Would give a boost.
The possible impact on the markets remained guesswork as a race was too short to be named and reports a possibility. Given the history of the 2020 presidential election, it’s no surprise that this 2021 runoff is far from easy.
Write to Randall W. Forsyth at [email protected]