As soon as reports broke about the victory of a Democrat in the Senate elections in Georgia, supporters of the current US President Donald Trump and the police clashed outside the Capitol building in Washington on Wednesday. Protesters arrived in Washington to express support for Trump, then stormed into Congress and surrounded it. Congress was shut down and all legislators were evacuated. Democrat Raphael Warnock defeated Republican representative Kelly Leffler in the second round of the election. After accounting for 98% of the ballots, Warnock received 50.5% of the vote, while Leffler was slightly lower at 49.5%.
Congress hastened to approve the election of Joe Biden as President of the United States amid the unrest in Washington and the introduction of a curfew. Biden received more than 270 Congressional electoral votes.
At the same time, the yield on Treasury bonds rose to 1% during Asian trading for the first time in 10 months. This is due to expectations that the US will now increase spending on combating the effects of the coronavirus, developing infrastructure, and generating energy from renewable sources.
The Democratic victory in the second round of the election of two senators from Georgia gives the newly elected President Joe Biden much more power, which includes new, larger incentives and unlimited infrastructure spending. However, if Congress unconditionally endorses Biden, the regulation may become more stringent and taxes on corporations will jump. This outcome is unlikely to please Wall Street. There is a high probability of increasing regulatory risks for the banking sector, healthcare, as well as large technology companies, and companies in the energy sector. At the same time, it is possible to limit both the after-tax profit and the estimate of earnings per share. The market is forced to put higher bond yields in prices. As a result, the yield on 10-year US Treasury bonds reached the level of 1.0052% - for the first time since mid-March.
However, it should be recognized that the existing concerns about tax increases and regulation are still not much of a concern for market participants. A much stronger argument for them is the high prospects for increasing fiscal support in 2021.
Experts predict that the development of infrastructure will eventually provide economic growth, create jobs, and contribute to the development of construction and transport. However, new reforms need to take funds from additional borrowing, which will have a bad effect on the US dollar, which is already suffering from an exaggerated US budget and a lack of trade balance.
At the same time, today's confirmation of electoral votes in Congress precludes any challenge to the results of the US presidential election.