Blue Waves & Green Numbers
The first trading week of 2021 kicked off with a bang as the Senate race in Georgia confirmed a blue wave victory for the Democratic party. The blue wave narrative mostly saw green numbers for risk assets as asset prices mostly reacted in the way one would expect, barring a few subtle surprises as well.
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So, why all the fuss about blue waves then? Well, the meaning a blue wave means that the Democratic party has the presidency, they have majority in congress and now a blue senate with VP Harris holding the tie-breaking vote with the 50-50 senate split.
Why is that important? Well, it means that there are now significantly fewer roadblocks for the Biden administration in terms of their ambitious policies. Now, even though that does increase the chances of higher taxes and possible stricter regulation for big Tech, it also means a much higher likelihood for much more fiscal stimulus.
Also, keeping in mind that even though tax hikes and stricter regulation is on the plan, there is a question of whether that would really be that high on Biden’s mind given his recent comments on Friday calling for another multi-trillion Dollar stimulus relief package.
How did markets take all this? Very much in line with expectations, barring a few small surprises in the form of US10Y and the DXY. However, in the grander scheme of things, these recent developments further feed into the market’s overall global macro expectations for 2021.
More on what this means for various assets and how we are looking to take advantage of that in our week ahead video.
Highlights of the video:
00:13 – Current Baseline
04:30 – Baseline expectations for the upcoming week
09:59 – Sentiment Shifts & Trade Plan
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