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The result of the Georgia runoff means the Democratic party now has control over the Senate, the House of Representatives and the Presidency. Higher fiscal spending and a more favourable environment for companies focused on sustainability are expected under the new administration. Thus, economists at HSBC maintain a cyclical exposure and overweight on US equities. 

See – Positive longer-term outlook for equities in general – UBS

Key quotes

“The prospect of a new round of stimulus ($2-3 trillion) to accelerate economic growth in the first half of 2021 could drive corporate profits and boost consumer spending on housing, autos, consumer discretionary and technology. This tends to tilt the markets towards pro-cyclical stocks. The accommodative monetary policy, vaccine progress and US corporate earnings growth expectation are also supportive factors for US equities.”

“The risk of faster US economic growth and higher government borrowing could push yields on longer duration instruments higher, steepening the yield curve. However, this could be offset by the Fed’s lower for longer rate setting and bond-buying programs. We, therefore, remain neutral on US Treasuries.”

“The sectors most likely affected are healthcare, technology, financials and energy – on potential agenda items such as rebuilding the Affordable Care Act, introducing an e-Commerce tax, new regulations in the fracking industry could result in more costly production for US energy companies. However, a boost to fiscal spending should support cyclical and industrial sectors, whilst certain policies will take time to materialise. We remain positive on technology, industrials, materials, consumer discretionary, communications and healthcare sectors in the US.”