Run it back... In the November elections, the state of Georgia went to Biden. But the Senate race went into overtime: a Georgia candidate needs to win over 50% of votes before advancing (it's a Georgia thing). That didn't happen, so we had runoff elections between the top-voted candidates this week. TLDR: Republicans had to win one seat to control the Senate, and Democrats needed two — the Dems unexpectedly took both.
November feels like eons ago... Back then, we were pretty sure Republicans would end up taking the Senate. That got Wall Street excited about a divided government (round 2).
- The S&P 500 soared 11% in November on the tech rally, and the decreased chance that Trump's tax cuts would get undone.
- Tech stocks jumped because a divided Congress makes it harder to pass legislation against Big Tech (or any legislation). Health care stocks shared the joy.
- Pot stocks fell because a Republican Senate makes legalization at the federal level unlikely.
Yesterday, we saw "The Undoing"... A partial reversal of November's market moves (not the HBO show). The tech-heavy Nasdaq index dropped on regulation fears, while pot stocks like Aurora and Canopy surged on legalization hopes. The Dow jumped to a record high, led by banks and industrial companies like Caterpillar — which could benefit from more stimulus and the Dems' $1.5T infrastructure plan. What investors really have their eye on: more stimulus money, which could be a priority for the Dem-controlled Congress.