Stocks move big on Georgia Senate election results — sector recap

No one man should have all that power… Except Biden — who’s just been given even more power over federal laws and legislations.

The Georgia Senate election on Jan. 5 gave Biden control of both the House and Senate — making it easier to implement major policies. Most notably…

• New economic stimulus could benefit the overall economy by putting more money into the hands of consumers and small businesses.
• Increase corporate tax from 21% to 28% which will lower corporate profits and negatively impact stocks.

Why does this vote matter? Any US federal laws or legislations must be approved by two groups — the House of Representatives and the Senate, before reaching the president for approval. Controlling both the Senate and House makes it easier to pass federal laws and legislations.

The democratic party gained control of the House during the presidential elections in Nov. and the Senate through the Georgia Senate election on Jan. 5.

Surging off the power

Additional stimulus — which Goldman forecasts to be $600b on top of the $900b announced in Dec. — gave life to three sectors that underperformed in 2020:

• Value stocks in the financial and industrial sector surged on the news. Both these sectors have yet to fully recover from COVID and could continue to benefit from further economic growth.
• Small-cap stocks, companies with a market value between $300m-$2b which are more sensitive to changes in the economy, surged on the election results.
• Retail stocks gained on the expectation of more consumer spending from additional stimulus checks.

With full control, Biden will have a big focus on two sectors, which saw a big jump after the Georgia results:

• Renewable and clean energy — Biden plans to spend $2t on clean energy infrastructure, electric vehicles and renewable energy.
• Cannabis — US Vice President, Kamala Harris, vowed to decriminalize cannabis at a federal level under the Biden Administration.

Learn more: What does a shift from growth stocks to value stocks mean for investors?

Big tech down

Tech stocks were the biggest losers coming out of the Georgia vote. Here’s what investors are fearing:

• Higher taxes — Biden’s plans to increase the tax rate on companies generating income outside of the US.
• Regulations on tech companies — the members of the Democratic party have expressed interest in regulating big.

Social media stocks could be heavily impacted if Biden pursues his plans to revoke Section 230 — the law that protects social media companies from being sued for user-generated content.

But all this is still speculation. The true impact will be shown when Biden provides his legislative agenda over the next year.