Key Takeaways From the U.S. Midterms: What a Split Congress Means for Markets

Nov 07 23:11 2018 Print This Article

The U.S. midterm elections played out much as expected, with Democrats picking up the 23 seats (and more) needed to retake the majority in the House of Representatives and Republicans easily defending their majority in the Senate. While divided governments have generally been decent for markets, we see greater policy risks than in past elections, including infrastructure on the upside and potential for government shutdowns, investigations and impeachment on the downside – not to mention trade policy risk, which is likely to continue unabated. These risks point to increased volatility and underscore our more defensive investment posture.

Key takeaways from the midterms

Congressional Republicans are more “Trumpian.” With moderates in the Senate (such as Bob Corker and Jeff Flake) gone, the Senate majority expanded by at least two seats, and pro-Trump Republicans left in the House, we could see more support for efforts like a border wall and greater potential for shutdowns – and a more partisan Congress.

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