News : Democrats poised to take the Senate — Markets slide early

Wednesday, January 6, 2021

Democrats poised to take the Senate — Markets slide early — Tech hit hardest

Jan 06, 2021

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Quick Fix

Democrats poised to take the Senate — In keeping with the "everything is always excruciatingly endless" nature of our times, the two Georgia Senate races bled into the early hours on Wednesday.

Democrat Raphael Warnock appeared certain to win his race over GOP Sen. Kelly Loeffler while fellow Democrat John Ossoff pulled narrowly ahead of GOP Sen. David Perdue around 2 a.m.. And the outstanding vote appeared to be tilted heavily toward Ossoff, whose campaign all but declared victory early Wednesday.

What's left to count — Our Zach Montellaro: "One of Georgia's two Senate runoffs remains uncalled, along with the Senate majority, as election officials in the state process a dwindling number of mail, provisional and early ballots that could tip the balance of power. …

"Georgia Secretary of State Brad Raffensperger said … on CNN that … there would be more results Wednesday morning: 'Hopefully by noon we'll have a better idea where we are.' … The roughly 100,000 outstanding votes will likely favor the Democrats."

To be clear, there could be recounts and challenges and all kinds of partisan fighting over the very close results in Georgia. But at least as of early Wednesday it appeared that Senate Majority Leader Mitch McConnell would likely be deposed as majority leader and President-elect Joe Biden will have the narrowest possible majority in the Senate to pursue an agenda focused on bigger Covid-19 stimulus spending, higher taxes on the wealthy, an expansion of Obamacare and stronger environmental regulations.

Even if the results hold and Biden has a 50-50 Senate with Vice President-elect Kamala Harris capable of casting tie-breaking votes, the incoming president will still be faced with potential filibusters and the need to bring along moderate Democrats who could recoil at some of the left's bolder agenda items. Still, a Democratic Senate would be a huge relief to the incoming administration, which would have at least two years to try and make large-scale changes to tax and spending policy.

Markets slip early — Stock prices around the world slipped early Wednesday on the prospect of full Democratic control in Washington and the risk of higher taxes on corporations and the wealthy.

The dips were limited by the prospect of bigger stimulus spending possibly boosting the U.S. economy in the months before Covid-19 vaccines can be widely distributed, potentially bringing an end to a pandemic that has transformed lives, killed over 350,000 Americans and wiped out millions of jobs.

Via Reuters : "Global stock prices slipped and bond yields rose … as investors braced for the prospect that Democrats could win both races … [A] 'blue sweep' of Congress could usher in larger fiscal stimulus and pave the way for … Biden to push through greater corporate regulation and higher taxes."

Nicholas Conant of Mercer Investments emails MM : "I think the market will be muted regardless of who wins the Senate. It's a win-win situation. Democrats win, another large stimulus in a few months. Republicans win, lower chance of major reforms and higher taxes."

U.S. futures sank early Wednesday with the Nasdaq taking the largest hit on fears of tighter regulations on technology firms that drove much of the remarkable 2020 rally back from Covid-era lows.

Banks, energy and health care firms could also suffer as investors consider tighter regulations. And investors more broadly will have to balance the prospect of larger stimulus against fears that higher corporate rates will trim profits.

GOOD WEDNESDAY MORNING — 2020 is not done with us yet. There's also this little electoral vote certification thing happening in the Senate today and fears of potential unrest in DC and around the country. Good times.

Email me on bwhite@politico.com and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on aweaver@politico.com and follow her on Twitter @AubreeEWeaver.

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Driving the Day

DRIVING THE DAY — We should have close to final results out of Georgia by midday around the time outgoing President Donald Trump is scheduled to attend a "Save America" rally on the Ellipse in DC.. The joint session of Congress to certify Biden's win starts around 12:30 p.m.. More on that below. … ADP private employment report at 8:30 a.m. expected to show a gain of just 63K

NEW ON THE PODS — The pandemic threw an unstable global labor market into a tailspin. Listen to the newest episode of POLITICO's Global Translations as hosts Ryan Heath and Luiza Savage explore what solutions exist going forward. The show airs this Wednesday. Tune in here.

THE FIN-REG ANGLES — Our Victoria Guida tweets: "This would end the chances for Judy Shelton to be confirmed to the Fed and Brian Brooks to be confirmed as comptroller of the currency ahead of Biden's inauguration." ...

It would also likely mean Sen. Sherrod Brown (D-Ohio) as chair of Senate Banking, which means headline risk for banks facing potentially nasty hearings and an easier path to confirmation for more progressive Biden nominees. Still, Wall Street reform is not exactly at the top of the Biden agenda.

TRUMP RAGES ON — Via President Donald Trump's tweet at 1 a.m.: "If Vice President @Mike_Pence comes through for us, we will win the Presidency. Many States want to decertify the mistake they made in certifying incorrect & even fraudulent numbers in a process NOT approved by their State Legislatures (which it must be). Mike can send it back!"

MM SIDEBAR — Pence has no power to do any of this. His role is circumscribed by federal law as purely ceremonial. Maybe Trump believes Pence can actually do something. Or maybe he just wants a fall guy and to kneecap a potential 2024 rival. Whatever the case, even if Pence tried (which he almost certainly won't), courts would quickly intervene to revoke his actions. This is all short for: It ain't happening, people.

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SENATE GOP MOVES AGAINST TRUMP'S EFFORTS — Our Marianne LeVine and Burgess Everett: "The Senate Republicans opposed to certifying … Biden's win are heading toward a hefty defeat on Wednesday. The only remaining question is this: how badly do they lose?

"Just 11 GOP senators have joined the effort led by Sens. Ted Cruz (R-Texas) and Josh Hawley (R-Mo.) to object to Congress' routine approval of Biden's Electoral College win. That makes 13 supporters — and many more have come out swinging against it."

TRUMP KNOWS HE LOST — Our Anita Kumar: "Trump has privately acknowledged he lost the presidency. He knows Joe Biden will replace him. He recognizes Congress will formally certify the results on Wednesday. To one person, Trump even confided he was 'just disappointed we lost.'

"Trump's acceptance has taken shape in recent weeks, according to three people who have spoken to Trump in that time span, with one conversation occurring a week ago. Trump admits his defeat, but still maintains he would have won a fair election, they said, despite no concrete evidence emerging of widespread voter fraud. He has even discussed his exit plans from Washington with staff, debating when to move to his South Florida Mar-a-Lago resort"

HOW TRUMP LOST GEORGIA (AGAIN) — Our Matthew Choi: "If Republicans lose in Georgia's Senate runoffs, one of the state's most vocal Republican election officials said the blame will rest squarely with … Trump.

"Speaking with CNN's Amara Walker on Tuesday evening, Gabriel Sterling said Trump's repeated efforts to challenge the results of the 2020 presidential race in his state needlessly divided the Republican Party, possibly costing them the critical Senate races there."

NEW STRAIN THREATENS ECONOMY ONCE AGAIN — Mohamed A. El-Erian in the FT: "As the new Covid-19 strain triggers tighter restrictions on economic activity and limits even more the movement of people, it has become increasingly clear that the road to vaccine-induced immunity will now have more potholes. Already it was a journey that was likely to add further stress to the great disconnect between a buoyant and profitable Wall Street and a struggling Main Street."

Markets

U.S. STOCKS RECOUP SOME LOSSES — AP's Stan Choe, Damian J. Troise and Alex Veiga: "Stocks closed broadly higher on Wall Street Tuesday, regaining their footing a day after suffering their worst loss in months amid the worsening pandemic and potentially market-moving Senate elections.

"The S&P 500 rose 0.7 percent, recovering about half of the index's losses from a day earlier. The majority of big stocks in the S&P 500 notched gains, with oil producers leading the way as crude prices strengthened. Stocks of smaller companies did even better than the broader market, driving the Russell 2000 index of small-caps to a market-leading 1.7 percent gain. Treasury yields rose."

2020 SPAC BOOM LIFTED WALL STREET'S BIGGEST BANKS — WSJ's Amrith Ramkumar: "Big banks earned billions of dollars in fees setting up so-called blank-check companies in 2020, highlighting how booming capital markets are helping Wall Street weather the coronavirus.

"U.S.-listed special-purpose acquisition companies, or SPACs, raised $82 billion in 2020, a more-than-sixfold increase from the year before and a figure greater than all of the money previously raised, according to Dealogic. They even attracted a star-studded group of backers, ranging from basketball legend Shaquille O'Neal to former House of Representatives Speaker Paul Ryan."

A SIMPLE WAY TO END LAWMAKERS' QUESTIONABLE STOCK TRADING — NYT's Andrew Ross Sorkin: "The next head of the S.E.C., expected to be named in the coming weeks, could seek to put in place a new rule for broker-dealers, the financial intermediaries that all trades go through and that the agency oversees. The rule would require the broker-dealers to set up a special compliance program for clients known as 'politically exposed persons,' a term that financial institutions know well as part of anti-money-laundering and bribery laws."

NYSE SCRAPS PLANS TO DELIST CHINESE TELECOM STOCKS — WSJ's Chong Koh Ping and Ben Otto: "The New York Stock Exchange reversed its decision to delist China's three largest telecommunications companies, after consulting with regulatory authorities about a recent U.S. investment ban. In a statement released Monday night Eastern time, the Big Board said 'it no longer intends to move forward with the delisting action' on China Mobile Ltd., China Telecom Corp. and China Unicom (Hong Kong) Ltd."

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Fly Around

GARY COHN TO IBM — Per release: "Gary Cohn, the former Goldman Sachs president/COO and the former director of the National Economic Council … was named Vice Chairman of IBM. He'll report to Arvind Krishna, IBM's Chairman and CEO, and work on a wide range of business development opportunities."

FED'S EVANS CALLS FOR POSSIBLE REVAMP OF FINANCIAL REGULATIONS — Reuters: "Chicago Federal Reserve President Charles Evans on Tuesday raised the possibility that U.S. financial regulation and supervision may be due for an overhaul, given the new reality that interest rates are likely to be low for a long time.

"The Fed recently undertook just such a review of its monetary policy framework, culminating in the adoption last August of a new strategy that targets 2 percent inflation on average and seeks to rectify shortfalls, but not overshoots, on the Fed's full employment goal."

WORLD BANK SEES SUBDUED RECOVERY IN 2021 — AP's Martin Crutsinger: "The global economy will experience a subdued recovery this year from the devastating pandemic, the World Bank predicted Tuesday, but it warned that the near-term outlook is highly uncertain and growth could be imperiled if coronavirus infections and delays in the rollout of vaccines continue."

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