Wall Street, Tech Firms Brace for a Blue Wave

With Democrats securing the Georgia runoffs, Wall Street braces for a Blue Wave movement. In particular, technology stocks showed a little restlessness. The tech-heavy Nasdaq 100 index and the S&P 500 fell lower Wednesday Only the Dow Jones Industrial average managed to register a record high, as energy and finance gains lifted the exchange.  

RELATED: As Hope for Blue Wave Dims, Stock Market Rallies

Right now, the market started reacting to a GOP shutout. Bonds started rising again, as investors bet that Democrats will incur more debt, which means higher yields. Bank stocks also rose in anticipation of higher rates. In addition, Democrat-favored industries such as solar energy, cannabis, and electric vehicles are enjoying a mini-surge in trading.  Meanwhile, tech companies shed off some weight.

Control of the Senate

Wresting control of the Senate gives the Democrats the power to set the legislative agenda. Despite the narrow majority, they will lord it over who presides the Senate committees. In addition, they get to call hearings and decide item priority. 

As it stands, the Biden era will start with a Democratic House and Senate, at least for its first two years. The tug-of-war between the GOP Senate and the House Dems is over for now, which means a smoother road ahead for Democratic initiatives. However, this is spooking markets as the Blue Wave can also mean unraveling some of the Trump administration's programs that helped big business. A Democrat-controlled Congress can push for progressive measures like higher taxes and increased regulation for industries, especially tech. 

Grabbing the Majority

With Democrats Raphael Warnock winning over Kelly Loeffler, and Jon Ossof projected to win over David Perdue, the Senate ratio changes to 50 Republicans and 50 Democrats. Given the tie, the Vice President will be asked to cast a vote to determine the majority. Since Biden and Vice President-elect Kamala Harris won the elections, Harris will cast the deciding vote in favor of the Dems. 

The first order of business is the ousting of current Senate Majority Leader, GOP Senator Mitch McConnell (Ky). The Democrats will use their numerical superiority to install current Minority leader Chuck Schumer (NY) to the top post. Doing so ensures that Biden’s top priorities will see the Senate floor. These priorities include stimulus packages, health care, infrastructure, renewable energy, and climate change.  

It’s Not That Easy Though

However, things won’t be smooth sailing for the Democrats. In both chambers, the majority they enjoy are razor-thin. At present, there are 222 Democrats versus 211 Republicans sitting in Congress. In addition, there are two vacancies. One covers the death of Representative Luke Letlow (La), who died before he could take his oath of office. The other is a vacancy in New York’s 22nd congressional district, where incumbent Anthony Brindisi’s term expired. The courts have yet to decide on who won the previous elections between him and Republican Claudia Tenney, who is leading by 29 votes. 

Progressive programs may face rougher seas than expected within Democrats as well. Given the less than stellar performances in the elections, many Democrat representatives will take the safe choice and stay moderate. This means the more ambitious measures like health care reform, climate change, and education bills may find it hard to get supporters. With a small majority, it will be much harder to get these bills out. On the other hand, Cabinet appointments will experience easier confirmations as they face less hostile lawmakers during hearings.  

Market Preferences

While Wall Street braces for a blue wave, they prefer a split government manning the country. Businesses don’t seem to mind that even though it usually means gridlock rather than progress. They are wary of over-enthusiastic policies that can affect business. Recently, the market applauded Trump’s tax cuts for businesses, which brought down corporate tax rates from 28% to 21%. Big business also benefited from reduced regulations, allowing them to focus on what they do best: making money.  

With the new setup, businesses will look out for any calls to adjust taxes yet again, which can disrupt the ongoing recovery efforts. It will also require companies to retool their systems again. Also, technology is wary of the incoming blue wave. A Democratic senate paves the way for the introduction of more laws and policies governing tech. This includes data privacy and antitrust issues. However, Wall Street will likely cheer on spending programs that Biden promised, including infrastructure and stimulus programs, especially those for business. Even the additional stimulus checks for Americans will find some of the money going to the markets.

Watch the CNBC TV video report featuring investor Joe Lonsdale discussing how Georgia Senate runoff races could impact tech stocks:

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As Wall Street braces for a blue wave, do you agree it signals changes for the market? If yes, what kind of changes are in store? Share with us what you think by placing your comments below.