- US Midterm election: a divided congress opens two possible scenarios
US Midterm election: a divided congress opens two possible scenarios
Wednesday 07 November 2018
Research / Market
US Midterm election: a divided Congress opens two possible scenarios
Key takeaway: In the midterm election Democrats win the House and the GOP (Grand Old Party) strengthens its position in the Senate.
Possible scenarios ahead: We believe there are two paths that could emerge between the Democratic leadership in the House and Trump. The first path is the emergence of divided government, leading to very little meaningful legislation enacted. The second path is a constructive one where there are areas of commonality between Trump and the Democratic leadership in the House (infrastructure spending). The biggest downside risk to financial markets from the midterm elections - a repeal of President Trump's fiscal tax plan – is extremely unlikely, as the Democrats do not have a veto proof majority in the House or in the Senate. However going forward, Trump will need to work with a Democratic House on the budgetary side and will no longer be able to drive fiscal policy, as it remains the purview of the House. Trump will maintain the unfettered ability to impose tariffs, so there continues to be high probability of a further escalation in trade tensions between US and China with the imposition of tariffs on the final $267bn in Chinese exports to the US.
In the midterm election Democrats win the House and the GOP (Grand Old Party) strengthens its position in the Senate.
Bavarian elections: Eropean political landscape continues to evolve
"The poor performances from the traditional parties in the Bavarian elections represent early signs of a political reshuffle at the federal level."
Brazilian elections: lights and shadows on the horizon
"The expected outcome of the presidential election occurred, with right-wing candidate Jair Bolsonaro (PSL) winning vs the leftist Fernando Haddad (PT)."
Asset class return forecasts - Q4 - 2018
We stick to the view that 2018 will be the peak of the global economic cycle. 2019 will most likely be a year of deceleration albeit with still above trend growth, before a further slowdown of growth towards potential in 2020.