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Market pressure ahead if Democrats flip Georgia senate seats: Raymond James

Yahoo Finance’s Alexis Christoforous and Chris Meekins, Healthcare policy analyst Raymond James, discuss how the Georgia runoff results could impact markets.

Video Transcript

ALEXIS CHRISTOFOROUS: President Trump campaigned in Georgia last night for Republicans facing a Senate runoff elections. He also took the opportunity to repeat false claims that he had won Georgia and the presidential election. Wall Street seems fixated on the Georgia elections because they're a big deal. They're going to decide which party will control the Senate. The outcome will determine how much incoming President Joe Biden is able to accomplish during the next four years, including the prospects for-- you name it-- additional stimulus, health care reform, climate legislation.

Let's talk about it now with Chris Meekins. He's health care policy analyst at Raymond James. Chris, always good to see you. Lots to get to here. But first off, just in the early voting, who seems to have an edge right now, the Dems or the Republicans in Georgia?

CHRIS MEEKINS: Yeah. So in early voting, it looked like in the [? beginning, ?] Democrats were taking the lead. Oh, Atlanta is what we're paying attention to with the huge number of African-American votes being cast early already there. The question is, what's going to happen with the suburbs? Republicans were gaining ground and decreasing the deficit last week in early voting. But then we had the tapes over the weekend. And that's the big question mark of what the impact of that will be today.

ALEXIS CHRISTOFOROUS: So walk us through the possible scenarios here for the stock market. We know that yesterday, an analyst at Oppenheimer came out and said if both of those Senate seats flipped to Democratic, that we could see a 10% correction in the stock market. Because the thought there would mean that it would be easier for Biden to get through some of his not-so-friendly Wall Street policies, including higher taxes. What's your take on that prediction?

CHRIS MEEKINS: Yeah. The lights may not go out in Georgia, but they might be dimmed a little bit on the market run we've been having, depending on what the outcome is. I think from our perspective, if you do see Democrats win both of those seats with a 50-50, very slim majority in the Senate, we could see some action that could result in a tax increase, really, in late 2021 or 2022.

But in the near term, you're more likely to get fiscal stimulus. You're more likely to see some potential nominations get through that may be more progressive. So it's a bit of a mixed bag. I think that it will take some time for the market to interpret what can get done versus what won't be able to get done.

But we're not talking about Bernie Sanders having 60 votes in the Senate to advance his agenda. We're talking about a much more moderate approach. And I suspect the market will be happy with the fiscal relief.

ALEXIS CHRISTOFOROUS: So do you think the market moves higher initially regardless of who takes the Senate?

CHRIS MEEKINS: My perspective is that if you see Republicans hold, the market probably continues what we've seen. I think if you see Democrats take both seats, then you could see some pressure on the market as there's uncertainty about what the potential outcomes will be. So if you do see a pullback, it's probably a great opportunity to get in. Because what we're going to see is likely more fiscal stimulus.

And remember, 50-50 is not 60 votes. The filibuster is going to stay. So you really only have a couple of bites at the apple through budget reconciliation to do the big things legislatively. And even that is limited to a certain degree.

ALEXIS CHRISTOFOROUS: What about the outlook for tech if the Senate swings democratic? I mean, we know that a lot of the Dems want to break up big tech as we know it. There could be tax implications for technology. Would that then be a time to, maybe, pull out of some of those larger tech names?

CHRIS MEEKINS: Yeah, I think that like Ray Charles, tech investors definitely have Georgia on their mind this week. And I think from my perspective, the big threat to tech really is the tax side of things. You know, the Biden administration would not need Congress to make some of the big actions on the antitrust side to really move forward. But they would need 60 votes in the Senate to get any additional legislation through.

So I think on the tax side, it's something they'll need to be watching. It's something that could impact them. But when it comes to breaking them up, a lot of that, potentially, if they were going to pursue it, will be through the executive powers that the president would have regardless.

ALEXIS CHRISTOFOROUS: I like how you're weaving in some of those Georgia song references, Chris. It's very good, very clever.

CHRIS MEEKINS: There's so much great music about Georgia. I think we need to-- a little livelier. How do we change the debate when people are talking about the same topic for the last couple days? [LAUGHS]

ALEXIS CHRISTOFOROUS: Yeah. I enjoy it. And there are actually an inordinate amount of songs about the state of Georgia. I want to get back to that rally last night with President Trump. Because during that rally, he berated members of his own party for refusing to support his attempt to overturn Biden's win in the presidential election. He praised Republicans who plan to challenge the electoral college results in Congress this week. Has the president set the stage for a civil war within his own party in the next few years?

CHRIS MEEKINS: I suspect-- the Republican Party has not had an incumbent president lose since George Herbert Walker Bush back in '92. And you had divisions within the party then after he supported a tax increase. So I think after a party loses, there always is this soul-searching.

I think in this instance, with a large portion of folks questioning the outcome of the election, that probably will become more pronounced. And you really see a lot of politicians trying to position themselves for different lanes within the party. You have a group of senators who are going to challenge the electoral college votes because they want to appeal to Trump voters. You have other senators that believe in upholding the Constitution and the limitations that senators have with regard to what their role should be about counting electoral college votes. I'm thinking of Tom Cotton, Mike Lee, that are trying to do the traditional conservative route.

So I think there's going to be a civil war. And you know, the devil didn't go down to Georgia. But every politician that possibly could showed up there to support those candidates. And I think it's going to take a little while for the Republican Party to figure out how it wants to move past the 2020 race.

ALEXIS CHRISTOFOROUS: Chris, I know you actually focus on health care policy there at Raymond James. What can you tell investors who are looking for opportunities in health care under the Biden administration? I mean, health care is a huge umbrella, right? But where, within that, are you seeing some opportunities for investors in the next few years?

CHRIS MEEKINS: I think regardless of what happens in Georgia, it's a great time in health care. Because if Democrats win, more money is going to get spent on health care. And the result, likely, is increased funding for Affordable Care Act subsidies, maybe additional money for Medicaid, which is a net positive going forward, maybe some additional money for provider relief funds and some entities like the National Institutes of Health and others.

I think if Republicans win, you take the legislative threats off the table. And you really just have to watch what a president can do on the regulatory side of things. I think when you look at valuations, health care is on the cheaper side compared to some other sectors. Within health care, if Democrats were to take those seats, I think you can look at managed care areas that are playing in the exchanges as well as Medicaid.

You look at some of the providers like hospitals. Because you could see an uptick in the number of people that have insurance, which would be a positive. I think if Republicans keep control, then areas within pharma, you decrease the likelihood of any legislation related to pharma. And as a result, when you look at these valuations, it could be a really good time there as well.

Additionally, you're not likely to get a really incredibly progressive head of the Centers for Medicare and Medicaid Services or the head of the Food and Drug Administration if you have a Republican Senate that they would have to go through for confirmation.

ALEXIS CHRISTOFOROUS: All right. Don't go taking that midnight train to Georgia, whatever you do. Chris Meekins, health care policy analyst at Raymond James, thanks so much.