What impact will the midterm elections without a “red wave” have on the market?
$E-mini NASDAQ 100 Futures(JUN4)(NQmain.US$ The US midterm elections are coming to an end, with the Democratic Party taking the lead in winning 50 seats and locking in control of the Senate (Senate). At the same time, according to the current “lead” situation, the Republican Party has basically won the House of Representatives (House), but the lead is within 15 seats. This means that a situation of splitting the National Assembly has basically taken place, but it is quite different from the “Red Wave (Red Wave)” expected by the market, that is, the big victory of the Republican Party (the House of Representatives leads by 30 seats and wins the Senate). The Democratic Party's performance was stronger than expected.
This is the first time that the US has allowed “mail-in ballots,” and a large number of mail-in ballots are biased towards the Democratic Party. This has also caused swing states such as Nevada and Arizona, which are anxious, to end up favoring the Democratic Party. If this situation continues, I'm afraid the 2024 general election will cause even greater changes. I wonder if Trump's Republican Party will come up with more ways to deal with it?
As for the impact on future policies?
1. Splitting Congress will make administration more difficult for the Biden administration.
Although some executive orders can be directly signed and put into effect by the President, they all need to be passed through the National Assembly when it comes to key taxation, debt issuance, etc. The Democratic Party has always implemented aggressive fiscal policies by “raising taxes, supporting antitrust, and increasing the government budget.” When congressional control is in the hands of the Republicans, it is not that easy (basically impossible) for the Biden administration to pass budget caps, raise tax rates, etc.
2. Increased domestic worries will shift the government's focus overseas.
As the Biden administration faces more challenges from the Republican Party, in order to shift internal focus, they are more likely to play the “overseas card” and shift their focus overseas. For example, the Russian-Ukrainian war, overseas inflation, trade terms, etc. Other countries need to be more careful when dealing with the US.
Furthermore, the Biden administration's support for Ukraine has always been criticized by the Republican Party, and the scale of future aid may be limited.
3. Increase the uncertainty of the 2024 presidential election.
Several states where the Republican Party lost in the Senate election this time all had voters endorsed by Trump, and Trump himself said he would start the 2024 presidential campaign on November 15. Of course, there are also new forces within the Republican Party — Florida Governor Ronald Dion DeSantis, who has performed well during the pandemic, has publicly stated his opposition to Trump, which will bring some uncertainty to the Republican candidate.
However, on the Democratic Party side, given that Biden is already old, most senators do not support Biden's re-election, hoping someone else will run in his place. However, the Democratic Party faced even greater challenges in the general election, all of which brought uncertainty to the 2024 presidential election.
In terms of monetary policy, after last week's CPI data, a number of Fed officials came out to speak.
FOMC permanent voting committee member and New York Federal Reserve Chairman Williams said --
Long-term inflation expectations in the US are relatively stable, but uncertainty about the inflation outlook has increased, and people's views on future inflation are increasingly divided, including a high percentage of those who expect deflation.
2023 FOMC voting committee member and Minneapolis Fed Chairman Kashkari said —
It is “too early” to discuss the Fed's current shift in austerity policies.
2023 FOMC voting committee member and Philadelphia Federal Reserve Chairman Huck said——
Now is the point where the Fed can slow down the rate hike.
2022 FOMC voting committee member and Kansas Federal Reserve Chairman George said——
It supports the US in slowing down the pace of interest rate hikes, and calls for a “more careful” approach so that the central bank has time to judge how rising borrowing costs are affecting the economy,
2022 FOMC voting committee member and Cleveland Federal Reserve Chairman Meester said
Although there are currently signs of a slowdown in inflation, there is still a huge risk of inflation. At the same time, she said that monetary policy needs to become more restrictive and remain restrictive over a period of time to keep inflation falling to 2%.
As can be seen, the differences between the “doves” and the “hawks” among the Fed officials are also getting bigger and bigger, and it can even be said that they are worlds apart.
I'm really worried if they will greet each other's elders during the meeting.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
Read more
Comment
Sign in to post a comment
