The US election result last November was, received wisdom had it, just about the perfect result for Wall Street.
No more would investors have to wake up wondering what Donald Trump had just tweeted and what fresh unpredictability he would be unleashing on markets.
Follow live updates as Georgia set to give Democrats the Senate
Joe Biden, it was assumed, would lead to a calmer ride for markets while also ending some of the trade disputes Mr Trump started or exacerbated with China and the EU.
At the same time, the failure of the Democrats to win control of the US Senate was also considered reassuring for investors, since it would curb the excesses of the more left-wing elements in Mr Biden’s party.
Republican control of Senate, it was hoped, would also prevent Mr Biden from pushing through some of the tax increases that he promised during the election campaign.
But following the Georgia run-off, the Democrats now look like having control of the Senate, potentially making it easier for Mr Biden to pursue some of his policy objectives.
To that backdrop, a big sell-off in the US stock market might have been expected, but it does not appear to have materialised yet.
Why? There are a couple of reasons. The first is that, with the Democrats having control of Congress as well as the White House, the US economy can expect an even bigger fiscal stimulus than it would have previously.
The US Treasury is in the process of sending out $600 cheques to each American but Mitch McConnell, the Republican Senate leader, blocked attempts to increase the amounts being paid out. Mr Biden, meanwhile, has promised to send out cheques of $2,000 apiece and described the $600 cheques as a “down-payment”.
So there could be a good deal more spending. The investment bank Goldman Sachs is predicting a further $600bn worth of stimulus measures on top of the recently-agreed $900bn package.
Accordingly, there have been big share price gains for companies that would benefit from a boom in infrastructure investment, such as the aggregates producers Vulcan Materials and Martin Marietta, the truck-maker Paccar, the digger manufacturer Caterpillar, the building equipment provider United Rentals and the industrial conglomerate General Electric.
With Mr Biden likely to push harder for decarbonisation, there have also been gains for the likes of Albemarle Corp, a major producer of lithium for electric car batteries, the nuclear energy provider Exelon and the electric car-maker Tesla.
Another potential beneficiary of a Democrat clean sweep today has been the banking sector.
This is because a bigger fiscal stimulus is seen as inflationary. That could force the US Federal Reserve into raising interest rates more quickly than would otherwise have been the case, which is good news for the banking sector, whose profitability has been crushed by near-zero interest rates.
The financial sector was the biggest single gainer on the S&P 500 index on Wednesday afternoon.
The Dow Jones Industrial Average, meanwhile, has been enjoying its best one-day session since 24 November last year and has hit a record high.
It is also interesting to note that, of all the main US stock indices to have rallied this afternoon, the biggest gains have been seen in the Russell 2000, the main index for smaller companies, which are also seen as major beneficiaries of more household and government spending.
Those are the potential winners. There are also losers. Shares of property companies have, for example, fallen sharply on concerns that interest rates may rise earlier than expected.
The biggest potential losers from a Democrat clean sweep, though, are seen as the tech giants.
Mr Biden threatened them during the presidential election campaign with heavier regulatory scrutiny and calls to restrict the power and influence of the likes of Alphabet – owner of Google – Facebook and Amazon could intensify.
As Paul O’Connor, head of multi-asset at the fund manager Janus Henderson Investors, put it: “Concerns about regulatory intrusion will weigh most heavily on the media, technology and communications behemoths that dominate US indices.”
James Athey, investment director at the fund manager Aberdeen Standard Investments, added: “More robust antitrust regulation and enforcement have the potential to suck the wind out of Big Tech’s sails at a time where valuations there already look increasingly hard to justify.”
That is one concern. Another is higher corporate taxes which, again, were promised by Mr Biden in the election campaign. Yet those fears may be overblown and most analysts are coming round to the view that radical changes to the US tax code may not happen.
Even if the Democrats do triumph in Georgia, their majority will be wafer-thin, so Democrats and Republicans in the Senate will still have to work closely together.
Holger Schmieding, chief economist at the investment bank Berenberg, said: “With a 50:50 distribution of seats in the Senate if the Democrats indeed prevail in Georgia, any legislation that does not garner some bipartisan support would have to be backed by the most moderate Democrats in the Senate to become law. Not all Democrats are in favour of what are called ‘very progressive’ policies in the US.”
Stuart Clark, portfolio manager at Quilter investors, added: “Any more extreme policies could be easily voted down by rogue senators.”
Apart from big tech, the asset class that, on the face of it, has the most to lose from a Democrat clean sweep is Treasuries, or US government bonds.
Implicit in a bigger fiscal stimulus is not only more government borrowing but also an earlier than expected uptick in inflation, the greatest enemy of fixed income investors. Accordingly, yields (which rise as the price fall and falls as the price rises) on US Treasuries have gone up after the Democrats seemed set to win in Georgia. The yield on 10-year Treasuries rose above 1% for the first time since March last year.
Similarly, amid expectations that the US trade deficit could widen with Democrat control of Congress and the White House, the US dollar has fallen. It has slipped to its lowest level against the euro since April 2018 and to its lowest level for six years against the Swiss franc.
But by making shrewd nominations, such as that of the former Federal Reserve chairman Janet Yellen as his nominee for US Treasury Secretary,Mr Biden has seemingly gone out of his way to soothe the nerves of investors.
The incoming president will want above all else to tackle COVID-19 and to do nothing to hamper any recovery.
That is why the overall outlook for markets following a Democrat clean sweep is far more nuanced than might first have been thought.