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What a “Blue Wave” Means for Financial Markets?

In a stunning development of events, the Capitol in the United States was taken by assault by Trump’s supporters. While this is as dangerous as possible because it threatens democracy, even more, interesting was that the stock market could not care less. 

In fact, the Dow Jones, one of the most important stock market indexes, closed the day at a new all-time high. This fuels the opinion of many traders and market participants that the market is disconnected from reality.

It may be so, but the market may be right. After the vote in Georgia, the Democrats won control of the Senate too. Effectively, the implications here are that they may pass whatever legislation they want without the need to make a compromise for it.

Buy American – stocks, bonds, currency, suddenly is on tap.

Green Energy, Investment, Job Boosting Policies

The market has high expectations from the “Blue Wave” policies. Despite promised tax hikes for corporations and high-earning households, the overall policies expected under the Democrat leadership focus on investment and job boosting.

The bulk of the investment projects are expected in infrastructure, while the new administration is also intending to boost green energy projects. More precisely, there is a $2 trillion green energy investment plan underway to make the U.S. electricity production carbon-free by 2035.

Not all markets were happy with the outcome of Georgia’s run-off. The tech sector, for instance. The reason for that comes from the promised corporate rate hikes that will severely affect the profitability of the sector. Also, tighter regulations threaten growth prospects, so the Nasdaq 100, the tech index, corrected yesterday.

While everything appears to be priced in, yesterday’s events tell us that there is still a long way until the transfer of power is completed. As such, the risk is that yesterday’s events may repeat or set a dangerous precedent moving forward.

Once again, yesterday’s events and the way the market reacted shows why trading and investing is a difficult game. Buying stocks while democracy is under siege only makes sense if one looks at the bigger picture. That is a peaceful transition of power on January 20th, a “Blue Wave” policy focused on fostering growth and boosting jobs.

For one day, America forgot about the pandemic. It shows just how much America has changed under four years of Trump’s presidency.

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