(This story is for CNBC Pro subscribers only.) Investors have a lot at stake in Tuesday's Senate runoffs in Georgia, according to Oppenheimer. The Wall Street firm said if the Democrats win both seats, the stock market could experience a correction from its current record levels because the Democrats would gain control of the Senate, in addition to the House and the White House. "A Democratic sweep of the two run-off elections in Georgia could cause the US equity broad market to experience a downdraft of anywhere between 6% and 10%," Oppenheimer chief investment strategist John Stoltzfus told clients on Monday. In Tuesday's election, Democrat Jon Ossoff is challenging Republican Sen. David Perdue and Democrat Raphael Warnock is up against Republican Sen. Kelly Loeffler. The stock market has generally priced in a Republican victory in at least one of the races, Oppenheimer noted. The firm said markets prefer a divided government with enough checks and balances to keep political power out of one party's hands. Democratic wins in both races could result in increased tax rates and more progressive policies, which could pressure equities, the firm said. "It is thought by not just a few folks on Main Street as well as on Wall Street that if tomorrow's run-off results in a sweep for the Democrats — providing them with control of the Senate as well as the House — that it would bode ill for business with the likelihood that corporate tax rates could rise substantially," said Stoltzfus. Democrats would have 50 seats if they win both races, giving them control of the upper chamber because of a tie-breaking vote from Vice President-elect Kamala Harris. Uncertainty surrounding taxes and spending could weigh on the equity market at least until the intentions of the Biden administration become more clear, Oppenheimer told clients. "A Democratic sweep in Georgia would likely see a boost in new government program creation and spending at a time when many voters, market participants and business leaders are concerned about the sizeable level of debt that the Treasury has had to take on to provide a financial 'bridge over troubled water' via fiscal stimulus to help individuals and businesses stay afloat during these trying times of Covid-19," Stoltzfus said. Oppenheimer also noted that the Georgia races could take weeks to determine winners. "Such an outcome could result in the potential for the equity markets to come 'off the boil' near term and to perhaps drift lower as investors ponder while votes are tabulated," said Stoltzfus. — with reporting from CNBC's Michael Bloom.
