Caution ahead of Georgia vote

US futures are marginally lower ahead of the open on Tuesday after a difficult start to the year.

There was some positive momentum coming from Asia and Europe but that quickly petered out on Wall Street. Last year ended on such a high that I wonder whether we’re just seeing some profit-taking in an uncomfortable period for the global economy.

Covid is wreaking havoc once again and countries are imposing harsher restrictions, with new variants of the virus spreading far faster than what we’ve seen previously. The UK went back into full lockdown today, while Germany extended its lockdown until the end of the month. With other countries seeing similar trends, restrictions are only heading in one direction. It was always going to be a tough start to the year, and investor sentiment will be put to the test.

Adding to the cautious start to the year in the US is today’s Senate run-off elections in Georgia, with the result having massive implications for the country over the coming years. The Republicans only need one seat to retain their majority with a double Democrat victory giving them a de-facto majority, given the casting vote of the vice-President.

Given the ambitious agenda of the incoming administration, there’s a lot hanging on the vote, the outcome of which will become clear over the coming days. From a market perspective, the nervousness we’re seeing may reflect the perceived improved chances of the Democrats in the two seats, with a clean sweep meaning higher taxes and more regulation.

Of course, it could also mean another substantial spending package which has little chance of getting through a Republican-controlled Senate. Should the Democrats pull off the once considered unlikely double win, stock markets may come under some pressure initially, with the dollar seeing some reprieve.

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/

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