MNI MARKETS ANALYSIS:  Biggest US Midterms Risk Is Status Quo

EXECUTIVE SUMMARY:

• Heading into Tuesday's midterm elections, the overwhelming expectation is that the Republicans win at least one if not both chambers of Congress. MNI's Political Risk team's midterm elections preview is available here.
• From an asset class perspective, the impact of that outcome is likely to be muted, and besides, there is little discernible pattern in recent post-midterm asset moves.
• But we could see a strong bearish Treasuries, bullish dollar move in the event the Democrats do the unlikely and win both the Senate and the House.
• That may seem counterintuitive given that it would simply return the status quo. But a strong reaction would be likely as it would change the macro policy setup for 2023 in a more expansionary fiscal / tighter monetary direction than is currently (overwhelmingly) priced in.

FULL ANALYSIS AVAILABLE HERE:

Midterms2022.pdf

Table 1: Post-Midterm Election Returns (changes calculated from Oct 31 of midterm year)

Source: MNI