Futures tracking the Nasdaq 100 index fell more than 1% on Wednesday as investors priced in the prospect of Democrats winning both races in a Senate run-off election in Georgia that will determine the balance of power in Washington.
Edison Research called one of the races for Democrat Raphael Warnock, unseating incumbent Kelly Loeffler, while Democratic challenger Jon Ossoff held a slim lead over Republican David Perdue in the other with 98% of votes counted.
A Democrat-controlled Senate would give more scope for President-elect Joe Biden to act on his reform plans including new COVID-19 stimulus, but it could also mean higher corporate taxes and tighter regulations on the technology mega-caps – policies not typically favored by Wall Street.
“A ‘blue wave’ might not be a bad outcome for markets as decisive fiscal action will help to accelerate economic recovery,” said Vasu Menon, investment strategy executive director OCBC Bank, Singapore.
“This will be broadly bullish for risk assets, particularly equities, credit, commodities, and emerging market securities.”