US markets are positively assessing the possibility of a Republican victory in the midterm legislative elections.

Markets are looking positively at the prospect of a Republican victory in the November 8 US legislative election and a political deadlock scenario, although they are concerned about the possibility of a debt crisis.

Briving.com’s Patrick O’Hara said the New York market, which has seen interest rates soar for months and the possibility of an economic downturn or even a recession, “raises a lot of concerns” and is generally uninterested in an election that occupied by the United States.

“We spent a lot of money during the pandemic,” Patrick O’Hara added, arguing that intermediaries would not object to budget cuts.

“The market is thinking[of the election]but is more concerned about the Federal Reserve and the turmoil in the UK,” explained David Kottock of Cumberland Advisors.

Sam Stovall of CFRE said the most representative index of US stocks, the S&P 500, rose in a year after the 19 midterm elections that took place after the end of World War II.

While the next 12 months could set a precedent, most analysts say the New York Stock Exchange will decline once the economy enters recession in 2023 before recovering.

This was confirmed by all public opinion polls a few days ago, the Republicans are in the lead in this election.

According to BNP Paribas economist Carl Ricadona, restoring opposition to at least one of the houses of Congress will lead to coexistence and “stagnation in Washington, which is usually not bad for markets because it means maintaining the status quo.”

“There will be no more major initiatives,” he added.

And the U.S. debt has ballooned by 36% in three years, or more than $8 billion, spurred by a series of economic bailout plans launched by former President Donald Trump and then continued into the era of President Joe Biden to counter the corona pandemic.

“We see contradictions between monetary and fiscal policy in many countries,” said Jack Applin of Crescent Capital, pointing in particular to the historical confusion that caused a major political crisis in the UK.

Thus, many governments are working to preserve the purchasing power of families by taking on some of the high cost of energy, which is contrary to the tendency of their central banks to reduce inflation by tightening debt conditions, while in return the Republicans hope not to fall into a state of paralysis.

And House Republican leader Kevin McCarthy said earlier that his party would seek budget cuts if it regained control of Congress.

The California representative threatened to use the debt ceiling as a weapon to force concessions from President Joe Biden, which must pass Congress to allow the government to meet its financial obligations.

Ian Shepherdson of Pantheon Macroeconomics warned that “Democrats cannot raise the bar on their own and the US will default” on its debt.

David Kotok also warned that “the market is not taking this risk into account” and warned that the dollar “will be seriously weakened by maneuvering on the debt ceiling,” not to mention that interest rates could rise further with US default risk. .

“When you elect crazy people to the House of Representatives, you open the door for trouble,” he said, referring to MP Marjorie Taylor Green on the right.

“It depends on how they move forward, but debt reduction in a high interest rate environment is viewed quite positively,” commented Sam Stovall.

“The only time that politics puts pressure on the market is when they do things that affect corporate results, interest rates and the dollar,” Tower Bridge Advisors’ Maris Ogg said, adding: “But most of the time it’s just creating noise and expression of anger. “He has no weight.”

Source: AFP