Wall Street rattled on greater possibility of Blue Wave in the US
By Nigel Green
U.S. stock markets “will be rattled” on Thursday as it looks increasingly likely the White House, Senate and the House will all be under Democratic control.
This comes as Democrat Raphael Warnock wins the first of two down-to-the-wire Senate races in Georgia, unseating Republican Kelly Loeffler.
Results are yet to come for the other run-off election between Republican Democrat Jon Ossoff.
If both Democrat candidates win, the Senate will be evenly split 50-50, but this then hands the incoming Democratic Vice-President Kamala Harris the tie-breaking vote.
If both Ossoff and Warnock win, it would bring the White House, Senate and the House of Representatives under control of the Democrats for the first time since Barack Obama took office in 2009.
The increasing likelihood of a Joe Biden-led ‘Blue Wave’ will rattle Wall Street on Wednesday. This has been evidenced by the U.S. stock market futures.
Futures for the benchmark S&P 500 index were down 0.1%, while Nasdaq was off 1.3% this week.
Investors will be jittery that control of the Senate will allow Biden to push through his agenda, including on major issues such as healthcare and environmental regulations - which are contested by Republicans - and enable him to roll back some of Trump’s business-friendly policies.
The fact that futures for the tech-heavy Nasdaq are down significantly demonstrates the fears that Biden might move to break-up Big Tech, as has been previously mooted.
Controlling the Senate will pave the way for Democrats to implement higher taxes to pay for greater stimulus spending – and this, in turn, will drive legitimate concerns of higher inflation.
Ultimately, the markets were hoping for a divided congress, as Biden winning the presidency brings stability and certainty, but with the Senate staying Republican to temper some of his agenda.
Historically, stocks perform better when one party controls the Senate and the other controls the House.
Biden’s policy proposals, including corporate tax hikes and larger fiscal stimulus packages will still need co-operation, but we can expect a knee-jerk reaction from Wall Street to the news coming out of Georgia.
Nigel Green is the chief executive and founder of deVere Group