The US midterm elections are due in four months, when US voters will go to the polls to elect the entire 435-seat House of Representatives, a third of the 100-seat Senate, as well as two-thirds of the 50 State governors.”
Republicans appear to be benefiting from traditional anti-incumbent party sentiment, President Biden’s low approval ratings and also widespread inflation concern, and polls show that they will win back control of the House of Representatives, while also gaining control of the Senate in a Congressional clean sweep. This will likely further gridlock US politics and increase policy risks if the US slips into recession and bipartisan fiscal action is required.
The months running up to midterm elections tend to be poor ones for equity markets, but are usually followed by some relief. This traditional seasonality may now be super-charged if it aligns with easing inflation and the end of Fed interest rate hikes, which we expect to boost global markets.
Ben Laidler, Global Markets Strategist at eToro
