We’re seeing caution on the US open on Wednesday, as the final votes are counted in Georgia and the Democrats head for an unlikely double win.
The victory means the Senate is split, handing an effective majority to the Democrats who now control all three chambers. While that doesn’t mean life will now be easy for incoming President Joe Biden, it will certainly be far less prohibitive and enable the party to deliver on more of their campaign promises, albeit not without disruption along the way.
Stock markets are holding up fairly well considering this was seen as the least desirable outcome, given Biden’s promises on tax and regulation, in particular, but a big old stimulus may sweeten the deal. The Nasdaq isn’t having its finest start to the year, which isn’t surprising, but under the grand scheme of things, it’s doing fine.
What was a little surprising earlier in the session was that, despite the US 10-year yield rising above 1% in anticipation of another sizeable spending package, the dollar continued to struggle and gold was holding its ground. Although that has since shifted, with the dollar now slightly higher on the day and gold off almost one percent.
All things considered, this week is shaping up to be a big win for the Democrats, bringing an end to an election they should have done even better in. There’ll likely be more drama as President Trump refuses to accept defeat, along with a surprising number of allies in the House and Senate, but that shouldn’t have a bearing on events two weeks from today.
Attention will likely remain firmly on the US this week, with the Fed minutes this evening the next point of interest. The central bank played the waiting game in December and will be very pleased that Congress eventually decided to assist with some of the heavy lifting, although I’m sure it will be hoping more help will soon be on the way. The situation in the country continues to deteriorate though so it may still be a matter of when, rather than if.
The jobs report on Friday will naturally be another key area of interest, although with a stimulus package passed before the end of the year, it may not quite pack the same punch. Less than 100,000 jobs are expected to have been added – although today’s ADP suggests that may be very optimistic – while the unemployment rate is expected to tick higher, something we should see more off in the coming months.