Democrats retake “House”, Republicans increase majority in Senate
The US mid-term elections have gone broadly as expected. The results mean another round of tax cuts are now unlikely. Rather we will probably see a return to “Gridlock in Washington“. The dollar’s period of strength may be coming to an end.
As expected, the Democrats have retaken the House of Representatives, the margin of victory – probably around 25 seats – being a bit larger than expected.
But the Republicans strengthened their hold on the Senate, gaining a net 2 seats from the Democrats. Given its significance in the Electoral College for the US Presidency, the Florida results are particularly interesting.
But the Republicans strengthened their hold on the Senate, gaining a net 2 seats from the Democrats. Given its significance in the Electoral College for the US Presidency, the Florida results are particularly interesting.
Once the split Congressional result – Democrats controlling the House, Republicans the Senate – became clear, markets quickly moved to discount the much reduced likelihood of a further package of tax cuts. Bonds rallied and the US dollar fell back a bit.
Recently, as Mrs.‘ Merkel’s control of events has faded, the US has compared favorably with Europe in terms of “strong leadership“. With a split-Congress this advantage looks much reduced. Major political initiatives are now unlikely, both in Europe and the US and, the days of a strong dollar look numbered, especially against the pound and the euro.
House Democrats are likely to initiate further investigations into President Trump’s tax affairs, the interplay between his policies and business interests and his connections with Russia.
Existing investigations will now have more political support. President Trump’s post-election decision to sack Attorney General Sessions, who had recused himself from the Mueller Russia investigation, should be considered in this light.
House Democrats will use their control of committees to hold hearings and summon witnesses, particularly in the fields of foreign and defense policy, the military and international intelligence. They will thus try to weaken the Trump Administration as much as they can.
The House is likely to promote a less friendly policy towards Saudi Arabia and a more aggressive approach to Russia. How far this will impact US foreign policy is uncertain.
With the Senate under Republican control, don’t expect an impeachment process to gain traction. Meanwhile, policy initiatives, of the sort likely to boost US economic prospects, will require compromise in Washington. Compromise may not be a “core skill“ of President Trump.
On the other hand, it’s not clear whom the electorate would most blame if we now have 2 years of relentless dirty fighting and policy gridlock.
A year-end rally still looks likely after these results.
Contact: Thomas Härter, CIO, Investment Office
Telephone: +41 58 680 60 44
Disclaimer: Information and opinions contained in this document are gathered and derived from sources which we believe to be reliable. However, we can offer no undertaking, representation or guarantee, either expressly or implicitly, as to the reliability, completeness or correctness of these sources and the information provided. All information is provided without any guarantees and without any explicit or tacit warranties. Information and opinions contained in this document are for information purposes only and shall not be construed as an offer, recommendation or solicitation to acquire or dispose of any investment instrument or to engage in any other transaction. Interested investors are strongly advised to consult with their Investment Adviser prior to taking any investment decision on the basis of this document in order to discuss and take into account their investment goals, financial situation, individual needs and constraints, risk profile and other information. We accept no liability for the accuracy, correctness and completeness of the information and opinions provided. To the extent permitted by law, we exclude all liability for direct, indirect or consequential damages, including loss of profit, arising from the published information.
Disclaimer: Produced by Investment Center Aquila Ltd.
Information and opinions contained in this document are gathered and derived from sources which we believe to be reliable. However, we can offer no under-taking, representation or guarantee, either expressly or implicitly, as to the reliability, completeness or correctness of these sources and the information pro-vided. All information is provided without any guarantees and without any explicit or tacit warranties. Information and opinions contained in this document are for information purposes only and shall not be construed as an offer, recommendation or solicitation to acquire or dispose of any investment instrument or to engage in any other trans
action. Interested investors are strongly advised to consult with their Investment Adviser prior to taking any investment decision on the basis of this document in order to discuss and take into account their investment goals, financial situation, individual needs and constraints, risk profile and other information. We accept no liability for the accuracy, correctness and completeness of the information and opinions provided. To the extent permitted by law, we exclude all liability for direct, indirect or consequential damages, including loss of profit, arising from the published information.
