For many, the New Year was filled with celebration and lots of optimism, I mean what could be worse than 2020? For financial markets, however, this New Year started on a dip, with The Dow falling 1.7%, and both the S&P 500 and the Nasdaq declining 1.8%. So, what could be behind this sell-off? Well, first and foremost although 2020 is over, the ramifications of 2020 are far from gone. Unemployment is still on the rise and millions of Americans are struggling, but this is nothing new unless you’ve been living under a rock for the past year. So, what is causing this unique decline? Well, many investors are pointing to politics, specifically the Georgia run-off elections for seats in the U.S. Senate.
The Senate is one of the main players in the U.S government making it very powerful. Georgia is specifically important because if Democrats win Georgia the Senate will be split 50-50, but since the Vice-president has a casting vote to break the tie it will go to the Democrats. With the Democrats recently gaining a boosted chance of winning according to polls, the anticipation has spurred investor uncertainty for the future, as whoever wins the Senate will have greater leverage over economic policy and laws. And because Democrats and Republicans each take very different approaches to the pandemic and its financial aftermath the outcome could most definitely make an impact on markets.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.