WASHINGTON, Nov 7 – Democrats rode a wave of dissatisfaction with President Donald Trump to win control of the U.S. House of Representatives on Tuesday, Fox News and NBC News projected, giving Democrats the opportunity to block Trump’s agenda and open his administration to intense scrutiny.
In midterm elections two years after he won the White House, Trump and his fellow Republicans were set to maintain their majority in the U.S. Senate, CNN, NBC and ABC News said, following a divisive campaign marked by fierce clashes over race, immigration and other cultural issues.
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MOHANNAD AAMA, MANAGING DIRECTOR, BEAM CAPITAL MANAGEMENT LLC, NEW YORK
“If initial results hold then it will be a slight positive for the markets as the less preferred outcome for markets of a Democratic Congress didn’t materialize. If one attributes part of the nearly 10 percent drop last month to a
pricing-in of a worst case outcome then we may be looking at a slight albeit short lived rebound in the days ahead.”
“Now that the elections are behind us, earnings and the Fed will be back in focus. All indications are that neither of those factors support expanding multiples for stocks.”
RAY ATTRILL, HEAD OF FX STRATEGY, NATIONAL AUSTRALIA BANK, SYDNEY
“The markets were geared for the Democrats winning the house. Now, we are seeing the dollar selling off as it looks certain that Democrats are in fact taking the house. This is almost exactly in line with expectations and polls.
“It’s a legislative gridlock as far as issues that require congressional approval are concerned. There is also the risk of a government shutdown.
“Trump has still got trade and policy levers and he is more likely to go harder on trade now. That’s our opinion. He will potentially extend tariffs to all Chinese imports by February. We’ll wait to see how this plays out.”
STEVE FRIEDMAN, SENIOR GLOBAL ECONOMIST, BNP PARIBAS ASSET MANAGEMENT, NEW YORK
“In terms of major economic implications, I think importantly, two things don’t change. One is the 2016 tax law changes. With divided government, Democrats will have no ability to roll back any of those measures. And second, trade policy. Because the president has significant authority over trade policy and can move forward without Congress on tariffs.”
“If the domestic agenda is blocked as a result of divided government, Trump could actually pivot more aggressively towards trade because that’s an area where he’s less constrained and he feels like it resonates with his base … And whether it’s good economic policy or not, I think Democrats are hard pressed to stand up too aggressively to the President on trade policy.”
“I see scope for additional spending measures passed by Congress. That’s because both parties have signaled support for an infrastructure program. Now, there are significant differences in terms of how large it should be, how you pay for it. And the role of the private sector in infrastructure spending. But the will is there, so I think that’s one area where markets might be under-pricing the risk of stimulus.”
KEITH LERNER, CHIEF MARKET STRATEGIST, SUNTRUST ADVISORY SERVICES, ATLANTA
“Even though the Republicans look like they did a little bit better in the Senate, the broad strokes are fairly consistent with what the consensus is and based on that we’re seeing a mild positive reaction.”
“The modest reaction suggests that you are basically getting what the market expected and the attention of investors is going to quickly shift back to the fundamental factors in the market that have been in focus, as far as the global economy, the Federal Reserve, earnings growth. What this is telling you so far with a modest reaction in the market is that these other factors are overwhelmingly more important than these results today that are basically more or less what investors expected.”
MARK GRANT, MANAGING DIRECTOR AND CHIEF GLOBAL STRATEGIST, B. RILEY FBR, INC, FT LAUDERDALE, FLORIDA
“The split Congress scenario was the consensus expectation with the Republicans losing the House and the Republicans keeping the Senate. Although some say a split is good for financial markets, I disagree. The issue now becomes the Democrats paying more attention to the … impeachment of Judge (Brett) Kavanaugh and the impeachment of President Trump. You could also argue that the Democrats might call for a roll back of the tax cuts. If those things come into actual play, I think it would be a disaster for the equities markets. I am somewhat concerned that this could really play out. This could be a decisive negative for the equity markets as well as the bond market.”
JUSTIN WARING, INVESTMENT STRATEGIST, UBS GLOBAL WEALTH MANAGEMENT, NEW YORK “Given that the “base case” scenario is playing out—what looks like a perfectly average mid-term election in terms of the President’s party losing an average of 31 or so House seats—markets are unlikely to react much ahead due to this result.
“That being said, some parts of the U.S. equity market could begin to face headwinds over concerns about the tone coming from the Democratic House committees. For example, Representative Maxine Waters looks poised to chair the House Financial Services committee. She has long opposed deregulation efforts for financials. In our view, there is a very low chance of increased regulation under this Congress, but markets will begin to fret about ‘what dreams may come’ if
Democrats win a follow-up victory in 2020. Even so, we continue to recommend an overweight to financials. Despite potential perceived headwinds from House committee hearings, there are bigger factors at play, and political considerations are unlikely to override the fundamentals.” – Reuters