What Wall Street Thinks Of The Midterms

The consensus view expects a split Congress outcome with a largely muted market reaction, though many are not ruling out a surprise.

In order to assess the medium-term market impact of the midterms and recommend trade ideas, SocGen economists, strategists and analysts have worked under three different scenarios according to the election outcome.

  • Scenario 1: Gridlock – GOP Senate and DEM House (most likely): Markets would fear that economy would be more vulnerable from now on with the absence of any further economic stimulus in the event of economic slowdown.
  • Scenario 2: Blue Wave – DEM Senate and DEM House: Markets would stir on speculation of a lame duck presidency and potential impeachment proceedings. Potential upside risk on Infrastructure.
  • Scenario 3: Red Wave – GOP Senate and GOP House (least likely): The least expected scenario for the market, which would probably trigger a short-lived risk-on environment. Trade tensions and Fed tightening will quickly be back in the market focus

SocGen’s US economist has provided potential policy outcome stemming from these three potential elections outcomes….

>>> continue reading: What Wall Street Thinks Of The Midterms

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