Yahoo Finance’s Rick Newman discusses how the Georgia elections may impact the markets and taxes under a Biden administration.
Don’t worry about stocks if Democrats win the Senate
Rick Newman·Senior Columnist
Tue, January 5, 2021, 11:23 AM EST·5 min read
Wall Street is worried. Democrats seem to have a shot at winning two Senate runoff races in Georgia, with the results likely in by the end of the week. If Democrats win both, they’ll win a narrow majority in the Senate and take full control of Congress.
Money would evaporate immediately, some analysts worry. Stocks fell sharply to open 2021, as polls showed the two Democrats had slight leads over the Republican incumbents. Oppenheimer predicted a market correction of up to 10% if Democrats win. The idea is that Democrats will promptly hike taxes, overregulate banks and shackle the economy, spreading gloom everywhere.
If Democrats win and stocks really tank, this could be one of those dips smart investors live to pounce on. It’s true that incoming President Joe Biden wants to raise taxes on businesses and the wealthy, and some Democrats want to go further than him. But the likelihood of major tax changes in Biden’s first or even second year are small, and some developments under a Democratic Congress could be better for stocks and the economy than if Republicans retain a blocking position in the Senate.
If Democrats control Congress, the first order of business after Biden takes office on Jan. 20 is likely to be not tax hikes, but another coronavirus relief bill, with additional stimulus checks for most households and an extension of supplemental aid due to expire in March. Every relief package pushes up the national debt, which could be a problem someday. But not now. Markets have reacted favorably to every other stimulus package, since they boost spending and help businesses in the short term. Markets would probably rise on another such bill.
Biden also favors an infrastructure plan that could be part of a new stimulus bill, or a standalone package that could pass with bipartisan support. This would be good for markets, too. It might not be an immediate injection of cash, but infrastructure spending is generally a good way to spend public funds because it makes the economy more efficient and generates long-term returns.
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