Financial Markets Frozen in Anticipation of Possible Negative Election Scenario
WASHINGTON, DC – November 6, 2018
On Tuesday night all of the speculation about the midterm elections will mercifully be over, and there is one potential outcome that is being called a “disaster” for the financial markets.
Over the past couple of years, stock prices have soared to unprecedented levels, and Wall Street has seemed to greatly appreciate the pro-business environment that President Trump has attempted to cultivate. Regulations have been rolled back, corporate taxes have been reduced significantly, and many corporate executives no longer fear that the federal government is out to get them. But after Tuesday, everything could be different.
The most likely outcome appears to be that the Democrats will take control of the House of Representatives and the Republicans will remain in control of the Senate. For what it’s worth, Nate Silver is currently projecting that the Democrats have an 88% chance of winning the House and only a 19% chance of winning the Senate.
But, of course, he was also projecting a huge landslide victory for Hillary Clinton in 2016.
The situation in the Senate has not changed in recent weeks. However, to everyone's surprise, recent polls show that Republicans may be able to regain control of the House. Democrats are no longer confident that the race will take the majority of seats. The fate of 69 seats has not yet been decided, but thanks to the Republicans, the difference in the number of votes has become very small. The victory will depend on the result of the elections in no more than 4-8 districts.
Democrats are greatly mistaken, saying that the midterm elections will turn into a "referendum on Trump." The President is surprisingly good at his duties, his work is approved by about 44% of Americans (which is close to the maximum level), while the Democrats lost their positions, unable to solve local problems.
In any event, a divided Congress would create gridlock in Washington, and according to Wedbush Securities managing director Steve Massocca, it would produce “some negative fallout” for the financial markets…
Massocca noted that there could be some negative fallout from a split Congress, since Democrats would hold committee chairmen seats in the House. “To what extent are they able to disrupt the Trump agenda will weigh on peoples’ minds,” he said.
“Donald Trump, the agenda, is very good for the markets. Less regulation, lower taxes,” he said.
But in the end, such a scenario is not likely to move stock prices too substantially.
However, if the Democrats are able to take control of both houses of Congress on Tuesday, Massocca believes that would truly be a “disaster” for stock prices…
Normally by now we would have a really good idea of what is going to happen tomorrow, but at this point the polls are all over the place.
The final generic poll conducted by left-leaning CNN has put Democrats 13 points ahead of Republicans. Meanwhile, a separate poll carried out by the more right-leaning Rasmussen agency has suggested that Republicans are leading, but by a much smaller margin of one point.
There are some that are entirely convinced that Republicans will be able to maintain control of both houses of Congress, and needless to say that would almost certainly cause a huge surge on Wall Street. In fact, one Nevada lawyer is so sure that Republicans will maintain control of the House of Representatives that he just flew to London and bet $130,000 of his own money on that outcome…
$130,000 is an enormous amount of money — I hope that he knows what he is doing.
On the other side, Nancy Pelosi is so confident about the outcome that she has already declared victory on national television.
But, of course, many other leading Democrats are extremely nervous right now. They remember the election night debacle of 2016, and they are concerned that something like that might happen again.
Democratic pollster John Anzalone is describing what they are going through as “the bed-wetting phase.”
“We’re kind of just in the bed-wetting phase now,” said Democratic pollster John Anzalone, a Hillary Clinton campaign alumnus who spent election night 2016 in Clinton’s Manhattan war room.
If the Democrats are unable to take the House, that will probably mean that a late “red wave” has saved the day for the Republicans and it will also probably mean that they will likely increase their Senate majority by a little bit.
In that scenario, we will see a lot more than “bed-wetting” from the left. Their hopes have been pinned on these midterm elections for nearly two years, and a crushing loss could set off a national temper tantrum of frightening proportions.