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The United States’ mid-term election is scheduled to be held for both houses of Congress and at state and local levels on November 6. The Republican Party currently controls both parts of Congress but that may change after Tuesday.
The Democrats seem on course to win the lower house but Republicans will likely maintain control of the Senate. This will mean political ‘gridlock’ particularly on domestic policy, so fiscal policy will probably be less expansionary, according to the latest report from Lloyds.
The overall market impact is likely to be modest but fiscal stalemate will weaken one argument for further rate rises. Whatever the result, don’t count President Trump out as midterms are not a good guide to the Presidential vote.
Currently, both houses of Congress and the presidency are controlled by the Republican Party, which makes it easier for President Trump to enact his agenda. That may change next week. There is still a lot of uncertainty about the outcome but it seems most likely that the Democrats will regain control of the lower house, but the Republicans will probably retain control of the Senate. The Democrats need to win an additional 25 seats in the 435-member lower house in order to command a majority, the report added.
As the consensus amongst US political experts is that around 73 seats not currently held by the Democrats are ‘highly competitive’ (either considered a tossup or only leaning slightly toward one or other party), this outcome seems very possible. Surprise political results have become the norm of late and the impact of recent developments including the tragic events in Pittsburgh is unclear, but we think that a Democrat win is the most likely outcome.
Winning control of the Senate will probably prove much more difficult for the Democrats. They only need to win 2 additional seats to secure a narrow majority, but of the 35 seats up for grabs, only 8 are currently Republican. So the Democrats will need to hold on to the other 25 seats (2 are independents who always vote with the Democrats) and win an additional 2 seats.
"The results of the midterm vote will also be seen as a verdict on the Trump presidency and will probably be used to gauge his chances of re-election. However, it should be remembered that the popularity of Presidents has frequently slumped in midterms only to pick up again as the re-election date approaches. Moreover, voter turnout in midterm years is typically well below that in a presidential election," the report commented.
