As hopes for a Democrat blue wave dims, the stock market rallied yesterday. The major market indexes rose Wednesday as the polls held little concern for traders. Nasdaq led the way with a 3.9% rise, while the Dow rose 370 points. Meanwhile, the S&P 500 went up 2.2%.
For months, analysts have predicted a Blue Wave approaching. This is a scenario where one party (Dems) will win the White, Senate, and Congress. As the Presidential election seems to go, Joe Biden, Democrats clung to the House majority. The Senate race, meanwhile, while tied 48 all, means that the chamber isn’t as easy to take away from the GOP.
The blue wave is yet to happen two days after the elections, and the stock market welcomed the diversity. Tech stocks led the gains as Amazon, Apple, and Netflix stock prices as hopes for a blue wave dimmed. If the GOP holds on to the Senate, they will worry about higher taxes and tighter regulations less.
Dems Keep Control of Congress, But Lost Seats
The Democratic Party may have won Congress, but they lost seven seats in the process. Republican’s seats are currently at 188, while Democrats have 203. Counting is ongoing for the remaining 44 seats. Republicans defeated a few freshmen Democrats to slice their dominance in the House.
Control definitely remains with the Dems. This turns back any gains made by Democrats during the 2018 midterm elections. And while the GOP turned several seats, the Dems were not able to flip a single seat. The results of this electoral disaster will resonate especially if Biden wins the presidency.
Republicans Holding on Senate Majority
Senate Republicans stood up and won the re-elections they needed. Susan Collins (R-Maine) hurdled her tough matchup. She squeaked by a win against her opponent Sara Gideon. As of 5 am EST, the Senate race is 48-48, with four seats remaining.
Senate Majority Leader Mitch McConnell remains unsure whether Republicans will hold the majority. He did express confidence that the odds favor Republicans holding on to the driver’s seat. McConnell said it’s “not unusual” to have disputes on close elections. He says the party should also improve its relations with suburban Americans.
A Split Congress Is Better For the Market
As the election winds up and the idea of a Democrat blue wave dims, an auspicious pair arises. We are seeing the possibility of a Democrat White House with a split Congress. Wharton Finance Professor Jeremy Siegel said that this is good news. He told CNBC on Wednesday that a divided government bodes well for the market and the economy.
“I think Biden is going to win this and I think very definitely the Senate is going to stay Republican.” He said that the combination is excellent for the country, even as the final outcome remains up for grabs.
Better Communication Between Parties
Siegel believes that Republican Senate leader Mitch McConnell works better with Joe Biden. He foresees the passing of a stimulus package. But he thinks the amount would be smaller than any bill if Dems controlled all houses. He said: “We’re definitely going to get a stimulus package. We’re going to get an infrastructure package. Biden is going to go over and talk to Republicans and they’re going to do it.” Biden is a “man to compromise,” and can help pass bipartisan stimulus bills better.
According to CNBC’s Carl Quintanilla, the markets do better when there is a split Congress. Siegel notes that “a gridlock doesn’t mean nothing will get done.” A divided Congress can prevent extreme changes from passing. For example, any radical tax plans the Democrats propose can face Senate opposition.
Biden Is Already Screwed
The Democrat sweep is yet to materialize. Now, the Biden presidency suddenly becomes a handicap. The dream of dominating the elections is over. Biden and Democratic Congressmen may be eking out close wins state by state, but hopes remain. The Senate race remains tight, and odds are that the GOP will maintain its grip.
Nancy Pelosi should get ready to lead a decimated Democrat majority in Congress.
And Biden, should he actually win, will have his work cut out for him. The Democrats will have to shorten their victory speeches. They should use more time soul searching on where they failed to connect with the citizenry.
As hopes for a Democrat blue wave dims, the markets will thank a Republican Senate to help preserve the balance.
Watch this as CNBC reports Wharton Finance Professor Jeremy Siegel as he explains why a split Congress and White House looks good for the economy:
Do you agree that a Republican Senate against a looming Democrat White House and Congress can help both the market and the economy? How? Let us know what you think by sharing your thoughts in the comment section below.