What the Georgia Runoff Election Results Means for Investors

Thursday, January 7, 2021 2:51 PM | Nick Dey

Although the results are not yet official, it appears that both Democrats, Jon Ossoff and Raphael Warnock, won their races to be Senators from Georgia in the next Congress.

This gives the Democrats effective control of the Senate. With a 50 Republicans and 50 Democrats, the Vice President will be the tie-breaking vote.

While there is a 60-vote threshold for a lot of legislation, a Senate majority is still meaningful in terms of how much of his agenda President-Elect Joe Biden will be able to enact.

This will have a significant effect on the economy and the stock market, so investors need to know what to be prepared for.

Covid 19

One of the places where there will likely be a pretty big change because of this election is how the covid-19 pandemic will be handled going forward. The biggest things that could change in regards to the pandemic are faster and larger economic stimulus packages and, potentially, a national plan for combating the virus.

Economic stimulus has often been hard to get through Congress, frequently resulting in smaller packages being passed. This tendency was on full display for nearly all of 2020, when it took lawmakers the better part of a year to finally agree on a second round of stimulus, only for President Trump to then delay signing it for close to a week.

With Democrats holding a majority in the House and Senate, these months-long delays will likely be avoided. Additionally, current Senate Minority Leader Chuck Schumer said Wednesday that one of the first things the new Senate will do is pass legislation for $2,000 checks to citizens, one of the key sticking points in the last bill. This should help bolster the recovery and drive the value of small-cap stocks back up.

Renewable Energy, Electric Vehicles, and Pot Stocks

Electric vehicles, renewable energy, and pot stocks were all very likely winners under the incoming President’s term before the Senate flipped. However, now that there is one-party rule in the legislature  it seems likely that these industries will likely have more to gain.

Biden aims to invest $400 billion in clean energy infrastructure and innovation. This investment alone is enough to justify the over 8% rally experienced in Construction Materials and the more than 7% gain posted in Construction & Engineering industries Wednesday.

Additionally, consumers typically opt out of buying electric vehicles for a few predictable reasons, the main ones being high cost, a lack of charging stations, and range. Though we don’t know exactly how Biden will incentivize the adoption of electric vehicles, it is likely that he would move to address these concerns. In doing so, Biden could implement tax credits for those who own EVs to help make them more affordable, as well as invest in the building of more charging stations.

Lastly, Pot Stocks could experience a massive increase in their access to demand around the country. We know Biden and Harris would like to decriminalize the drug nationwide and this could potentially push states that haven’t legalized yet, to do so sooner.

Tech companies

One of the places to be wary of under a Biden presidency, could be with some of the largest tech companies in the world. While their share prices will certainly not drag for four-straight years, the beginning of Biden’s term could be a rough one. Lawmakers on both sides of the aisle want to find better ways to hold Facebook (FB), Alphabet (GOOG), and others accountable for content posted on their sites. These posts are currently protected under Section 230 of the Communications Decency Act, which Biden's top tech advisor opposes, although what change a Biden administration could make remain unclear.

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