The outcome of the US Senate runoff in Georgia at the start of 2021 marked a turning point in US politics which
could have significant implications for the US economy and global stock markets.
The Democratic party, which had not won a Senate race in Georgia in 20 years, surprised markets by securing
the two seats in the state. In the process, it gave the Democrats control of both chambers in the US Congress
and President-elect Joe Biden the ability to bring about policy changes.
The S&P 500 index rallied 3.4 per cent during the week of the Senate race in Georgia in response to
a Democratic victory in the state.
One positive outcome of the Democratic blue wave is the possibility of more fiscal stimulus and government
spending, which augurs well for the US economy and indirectly the world economy.
MORE STIMULUS AND SPENDING
Biden has just proposed a sizeable US$1.9 trillion stimulus package to give the pandemic-hit US economy a lift.
This is on top of a smaller US$900 billion stimulus package that Congress approved last month. Biden has also
indicated plans to spend significantly on longer term initiatives that will combat climate change and result in
infrastructure and clean energy investments, all of which will create millions of middle-class jobs in America.
The gridlock in the US Congress has affected the ability of the Democrats to push for greater government
spending to support the pandemic-riddled economy.
Before Congress agreed on the US$900 billion stimulus package in December, the Democrats had wanted
a much higher spending plan of US$2.2 trillion.
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