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What the middle of the parliamentary term may mean for the markets

The mid-election gave a split decision on the congress, as expected, with results still trickling in early Wednesday. Democrats took…

The mid-election gave a split decision on the congress, as expected, with results still trickling in early Wednesday.

Democrats took a majority in the House for the first time since 2010, while the GOP retained the control of the Senate, how many were characterized as a referendum on President Donald Trump’s first two years in office.

As stated, the outcome would suggest that the President will face more challenge to his legislative powers during the last stretch of his first time in the Oval Office, as he faces the head of adopting or expanding economic policies, including increased spending and further tax cuts, that his administration has been considered an increase in markets and the economy.

It is not clear how changes in the political landscape will change the Trump agenda or how investors interpret the newly formed framework on Hill, but the resulting gridlock in Washington can be a blessing for bulls:

Trump celebrated the mid-afternoon election on one early morning tweet like a big victory:

The chairman is scheduled to host a press conference likely to discuss the election at 11 o’clock east

Meanwhile, house ministry leader Nancy Pelosi celebrated Democratic Wins on Tuesday and said, “Tomorrow it will be a new day in America.”

In the markets, Dow Jones Industrial Average

DJIA, + 0.68%

The S & P 500 Index

SPX, + 0.63%

and the Nasdaq Composite Index

COMP, + 0.64%

were ready to open stronger, as indicated by terms for Dow

YMZ8, + 0.50%

S & P

ESZ8, + 0.59%

and Nasdaq-100

NQZ8, + 0.84% ​​

The dollar sold off, down 0.6%, measured by the ICE US Dollar Index

DXY, -0.48%

a meter of buck against half-dose currencies. US sovereign debt, which is reflected in the benchmark 10-year government debt return

TMUBMUSD10Y, -0.43%

collected at 3.18%, yields lowered while gold

GCZ8, + 0.54%

and crude oil prices

CLZ8, + 0.96%


What Strategies Said


“The reason that an emblematic republican party that holds both houses may have changed another tax cut, which increases the deficit, has decreased. At the same time, the concern was that if the Democrats had won back both houses, tax adjustments and regulations could have been rolled back or revoked, “wrote Sean Darby world leader at Jefferie ] s, in an early Wednesday research report.

“A weaker dollar is, at least for now, the only sign that something has changed in the financial markets after the US mid-term election. The Greenback is currently down to all other major currencies. It is widely believed that a shared congress will stand in the way of some of President Trump’s plans, the deficit worsens fiscal policy 2.0. As the prospects for a new sugar jug ​​for the US economy fade, the dollar’s strength, “wrote Ricardo Evangelista Senior Analyst at ActivTrades ] in a Wednesday match with reference to corporate tax cuts made in late 2017.

“The US dollar index has been sold as Democrats are set to take control of the House of Representatives and the Republicans retain control over the Senate. The greenback declined as a trader feels the life of President Trump will be hard to see a congress ss is divided. In view of the success of democracy, chances for further tax relief from Mr Trump have decreased, “wrote David Madden Market Analyst at CMC Markets .

Some market strategies predicted Wednesday to result in stronger profits in the days after the vote, with the grid closing followed by earnings on the stock markets in the following days, weeks and months: [19659002] “Bullish-No Change-Additional Winnings Probably After The Half-Time Selection Based On Pricing Measures Only (Without Viewing Poll Results) Oppo target is close to 2782 and then 2791. Buy dips at 2730 and under close key support at 2707-10”, wrote Mark Newton Founder of Market Research Company Newton Advisors on Wednesday.


Bond traders can see a split congress as bullish for government bonds, moving in reverse to yield returns. Real estate investors expect Democrats to undermine the prospect of further tax cuts or other measures that would further increase budget deficits that have increased hacking among bond investors as they increase debt delivery.

“While we can see further volatility throughout the day, it is clear that the medium-term impact on bond markets is likely to be quite modest, as the election results will 1. hardly change an environment where growth loses momentum, 2. does not affect Fed’s gradual tightening cycle and 3. do not change the president’s trade dispute with China, “analyst at UniCredit in an early Wednesday report.

“Treasuries are firmer faster when the dollar is falling. Real money and Asian bank purchases of 5 years and 10 years. Stocks get a lot of profits as democrats fit into the house, there is no” blue wave “and unlikely to limit current trade policy, ” Tom di Galoma Managing Director of Treasury’s Trading on Seaport Global Securities.


Trump has been critical of the Fed chairman Jerome Powell, who has approved a path towards normalization of interest rate policy from the crisis levels. Some market participants are afraid that Trump in conjunction with a shared congress will use Fed as a possible scape-get, if the economy begins to show cracks. He has already adopted a definite critical tone against Powell. Fed is slated to commence a two-day policy meeting on Wednesday, with an updated statement from the central bank slated for Thursday at 2:00 ET.


A split in Washington may force the Trump administration to mitigate its hard stance on countries like Iran, with the president already showing some softening in sanctions against Iranian exports after the United States granted exceptions to allow eight nations to continue buying Iranian raw despite US-driven economic sanctions against the Islamic Republic. Some energy makers also predicted increased regulation in the sector with a democratic house.

On Wednesday, the US benchmark for crude oil prices was sharply higher following a weakness. WTI raw for December was up 1.1% at $ 62.89 per barrel early Wednesday while January Brent oil

LCOF9, + 1.26%

The international guideline increased by 1.6% at $ 73.30 per barrel.

“They also made the prediction before democracies won the United States House of Representatives and already talk about more taxation and regulation of energy, thereby counteracting US energy production. This is exactly what shale oil producers need because they are still trying to raise more money than what they spend when they produce a dish of oil, “wrote Phil Flynn Senior Market Analyst at Price Futures Group .

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