The stock market fluctuated on January 6 after it was announced that two Georgia Senate seats up for grabs in the run-off election were won by Democrats. The win creates a 50-50 split in the U.S. Senate, but Vice President-elect Kamala Harris can break any tie vote. This means the Democrats are in control of both branches of Congress and the White House and can pretty much implement whatever they want to. This will of course have a major impact on the stock market.
It already is.
What’s Happening with Pot Stocks?
The stock market reacted quickly after the two Democratic Senators were confirmed as the winners of the run-off elections on Tuesday, January 6. Cannabis stocks soared. That’s because the Democrats are more open about legalizing recreational marijuana than their Republican counter parts.
After the November election, the number of states that allowed medical-use marijuana increased to 36 and the number of states that legalized recreational cannabis use grew to 15. While cannabis is still illegal on the federal level, Vice-President elect Kamala Harris said on the campaign trail she wants to end the federal prohibition of cannabis.
That would be a big win for cannabis. Because it is currently illegal, marijuana companies have difficulty getting money from traditional financial institutions, which has prevented marijuana companies from accessing the kind of capital they need to grow and expand.
With the Democrats in charge of Washington, D.C., there’s a good chance the Senate will remove marijuana from the Controlled Substance Act. This would open up the door for other cash-strapped states, like New York, Pennsylvania, and Connecticut, to legalize recreational use pot.
Investors are already banking that eventuality into cannabis stocks. All of the big U.S. multi-state operators saw their share prices jump double digits.
Even if the Democrats don’t legalize cannabis on the federal level, there’s still a good chance they’ll loosen the law, which makes it difficult for cannabis companies to get loans from big banks.
How Will Other Stocks Perform with Democrats in Charge?
Renewable energy stocks also got a boost thanks to President-elect Joe Biden’s green energy agenda. Biden has said his administration would remove carbon pollution from the county’s electricity system by 2035. That doesn’t mean Canadian green energy stocks looking to get in on the action south of the border are trending higher. Like President Trump, Biden is pushing a Buy-American policy.
The big loser after the Senate vote were tech stocks, especially the so-called FAANG stocks, which includes Facebook, Inc. (Nasdaq:FB), Amazon.com Inc. (Nasdaq:AMZN), Apple Inc. (Nasdaq:AAPL), Netflix, Inc. (Nasdaq:NFLX), and Alphabet Inc (GOOG) (formerly known as Google).
Tech stocks were the biggest winner during the coronavirus pandemic but are taking a breather. The Democrats have said they want to put more scrutiny on tech giants in an effort to limit their size and reach.
Biden also said that if he won the White House, he would change the tax code and increase the tax rate on capital gains and dividends for the wealthiest Americans. First, there are a lot of wealthy American investing in stocks. Second, after capital-gains taxes get implemented, the stock market has a history of selling off.
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