Isaac Boltansky, director of policy research at Compass Point Research & Trading, joins Yahoo Finance Live to discuss the winners and losers in different electoral scenarios from the Georgia Senate runoff, as well as the three areas he’s focused on from President-elect Joe Biden’s agenda.

Video Transcript

MYLES UDLAND: Well, let's stay on this race, implications for the markets. As we mentioned, we've already seen financial markets moving considerably in the overnight hours and into futures this morning. Joining us now to talk more about this is Isaac Boltansky. He's the director of policy research over at Compass Point Research and Trading.

So Isaac, let's just start with-- I like this phrase that you use. It's a blue tide, not really a blue wave. How do you expect, you know, a split Senate that has effectively a one-seat majority with the vice president to go about getting some policies through? And how, I guess, conservative do you expect to be? Maybe not quite the right word, but conservative this, you know, Democratic control to be in terms of advancing some of their main policy goals?

ISAAC BOLTANSKY: Good morning. You know, before we jump into anything, I think Jess's point is absolutely right. This is still very fluid. We only know the outcome of one of the races. That second race still has the potential to have a recount in it. So it's just important to always highlight that point, that there is still some uncertainty.

But if we go down that rabbit hole of Democrats winning control of the Senate, my view is that there's going to be a group of moderate red state Democrats who are going to, in many ways, dictate what is possible on Capitol Hill. And that is, net-net, market positive. And that group to watch is Manchin from West Virginia, Tester from Montana, Sinema from Arizona. Those folks are going to decide what is possible.

And the takeaway for markets should be simply that the most expansive progressive policies that we heard from the campaign trail simply will not be enacted in that scenario.

JULIE HYMAN: I mean, you say these folks are going to be the sort of deciding factors. And we already know what they're going to do, right? I mean, these are known quantities in the Senate already when you talk about folks like Manchin and Tester. And so what do you think are the more sort of realistic parts of the Biden agenda that can be achieved even with, say, one flip of a Senate seat in Georgia?

ISAAC BOLTANSKY: So I think there are three different buckets that I'm focused on. The first one is there will be more fiscal stimulus and COVID support. And I think that we should now expect in this scenario a $500 billion to $1 trillion package getting passed in the first quarter. That's object-- that's issue number one.

Number two is all or at least most of the Biden nominees would get confirmed. And so I think that you would see a more aggressive regulatory posture in certain areas, like financials and energy and health care, because they'll be able to get their nominees through.

And then on the third bucket, we've got to watch taxes. And there will be a budget reconciliation bill in this scenario that would allow a simple majority to pass a tax bill, just like we did in 2017. But I truly believe that that Biden campaign tax proposal of a 28% corporate rate, that will have to be moderated because of those centrist red state Democrats that I mentioned before in the Senate.

- We're seeing a pretty big move in the premarket here in cannabis stocks, Isaac, really double-digit gains for the likes of Tilray, Aurora, many others in the space. But is that the wrong market reaction here in the early going? And I bring that up because Biden and Harris, they haven't necessarily supported federal legalization of cannabis. They have just supported decriminalization.

ISAAC BOLTANSKY: It's a very important distinction. And I understand why the headline reaction is that this is positive for cannabis stocks. I get that. But when you actually dig into the proposals and when you think about the composition of this Congress, I don't think that we are going to have marijuana being legalized.

I think that we will continue to-- on the federal level. I think we will continue to see some easing of restrictions. I think it will be easier for operators in states where it's already legal via the return of something called the Cole Memo and most likely more research bills, which would make it easier for the decriminalization. But, look, I think that the road to full federal legalization is more complicated than the headlines suggest right now.

MYLES UDLAND: Isaac, let's talk a bit about the bank's financial policy. You write quite a bit in your note about potential implications here. There's been a big deregulatory push under Mnuchin's, you know, Treasury Department to kind of dismantle, I guess, the financial regulatory state or, you know, pull it back somewhat. How do you see things evolving there in the Biden administration?

ISAAC BOLTANSKY: The Biden administration is going to nominate individuals who will roll back some of the bank deregulatory activity from the Trump administration, but not all. And I think it's important to note the scale and scope of the bank deregulatory actions by the Trump administration are actually far less than anyone thought the morning after Trump won. The timelines and some of the complicated nuances made it so that it wasn't a full pushback.

And so the way I think about this is there will be certain areas of focus. And I look at the Consumer Financial Protection Bureau. They will become more aggressive, and I think that they will go after especially COVID-related companies, like credit bureaus or servicers or debt collectors, folks who are interacting with individuals during this crisis. And so I look at the CFPB as being far more aggressive.

And then on the bank regulatory side, look, to me, the story here is we're going to have more fiscal stimulus. I think that's that's issue one, two, and three for bank investors. Yes, the regulatory state will become less hospitable over time. But that is going to be a storyline that plays out in the second half of 2021 and into 2022.

- You wrote this-- you wrote this morning pretty extensively, Isaac, now the odds are higher for potential education reform. What are you talking about here? Is this full-scale debt reduction for students? How aggressive do you think the administration will be?

ISAAC BOLTANSKY: Well, look, President-elect Biden told us himself. Just a few weeks ago, he came out and said that he was unlikely to administratively cancel the $50,000 in student loan debt that some Democrats had hoped that he would cancel.

My view is that there are really buckets of action that we should expect. Number one is a real pronounced push to increase tuition relief for certain borrowers. There are things that you can do with Pell Grants to provide more funding.

Number two is I think that they're going to revisit the dischargeability of student loan debt. Right now there are very strict limitations on whether you can actually discharge student loan debt in bankruptcy. That's going to be something that they revisit, which is intriguing because obviously President-elect Biden wrote that bill when he was in the Senate.

And the third area is cancellation. Look, I think there's going to be some cancellation. I don't think that it's going to be a huge number because of the budgetary realities around it. But yes, I do think that we can see a bill where we have $5,000 to $10,000 in student loan debt cancellation for federal student loans.

MYLES UDLAND: All right, Isaac Boltansky with Compass Point. Isaac, always great to get your thoughts. Thanks so much for joining this morning.