Stocks, US dollar fall on expectations of Democratic victory.
The Democratic Party is likely to win two contested Georgia Senate seats, giving the party the trifecta for the first time since 2009, according to recently released election data. That would allow President-elect Joe Biden to govern unopposed, although Trump’s fraud claims will be dealt with by Congress today.
At the time of writing, and with 98 percent of reports, Democratic candidate Raphael Warnock leads Republican challenger Kelly Loeffler with 50.6 percent of the vote, while running mate Jon Ossoff currently holds the lead over Republican challenger David Perdue with 50.1 percent. .
“We have been told that we cannot win this election. But tonight we proved that with hope, hard work and people by our side, anything is possible,” Warnock said during the Livestream message. “I’m going to the Senate to work for all of Georgia, no matter who you vote for in this election.”
Warnock would be Georgia’s first black senator, although many are concerned about his record of anti-Semitism and domestic violence. Ossoff would be the youngest member elected to the post.
All eyes now turn to Congress, which meets today to confirm the results of the Electoral College. Trump called on Vice President Mike Pence to deny the certification of some voters. The certification could take hours as some senators and representatives plan to challenge the outcome of some states, such as Pennsylvania, Wisconsin and Georgia, after evidence of voter fraud.
Analysts say Trump’s attempt to overturn the election results is likely to fail because he would need the support of a majority of Congress, which seems unlikely at this point. Senate Majority Leader Mitch McConnell expressed his disagreement with the president on some key issues and also called on senators to ignore Trump’s demands. So far, eleven Republican senators have joined Trump in his claims, as well as more than 100 Republicans in the House.
In addition to all this political drama, the United States is still battling the spread of COVID-19, which has infected approximately 21,579,641 Americans and killed 365,664, making the US the worst affected country in the world. The US is currently in the midst of a vaccination campaign that has been heavily criticized for being slow.
This week will see some important data on the current state of the US economy.
On Monday, Markit Economics released a manufacturing PMI that signaled the sector expanded in December at 57.1, up from November’s 56.5. That’s the highest number since September 2014 and is part of an eight-month winning streak.
“Amid a sharp deterioration in vendor performance, cost burdens and selling prices rose as firms sought to partially pass on higher input prices,” IHS Markit said.
The Institute for Inventory Management (ISM) confirmed the data on Tuesday, reporting that the manufacturing PMI came in at 60.7, up from expectations of 56.6 and 57.5 in the previous month. “However, output expectations softened slightly as the post-election peak eased and virus cases picked up again,” IHS Markit added.
Markets don’t seem happy with the idea of a Democrat-controlled Senate, which is reflected in the recent performance of the US dollar. This is also why stock markets have been volatile lately.
The main cause of this pessimism appears to be the fact that the Democrats’ trifecta would increase the likelihood of additional fiscal stimulus measures, which is generally bad news for the dollar’s performance.
“The Democrat-led government is expected to add more stimulus to help ease the virus crisis, and that means a weaker dollar,” BNP Paribas analyst commented.
Possible measures that affect the markets also include tax increases and other regulations.
So far this week, the US dollar is down 0.69 percent against a pack of its major rivals, continuing a two-week losing streak.
Economic data has not changed since our last report.
Quarterly gross domestic product stands at 33.4 percent, which is more than expected. Inflation data also beat expectations and signaled an improvement on the monetary front, while the unemployment rate came in at 6.7 percent, lower than expected.
The Federal Open Market Committee will release the minutes of its latest meeting today.
On Thursday, the US Labor Department will release initial and interim jobless claims data.
Also on Thursday, the Institute for Inventory Management releases the services PMI for December.