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How will markets react to US mid-term elections?

Publication Date: 06 Nov 2018 - By ReachX Team By ReachX Team
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Ever since incumbent US President Donald Trump’s election in November 2016, market commentators have constantly speculated whether gyrations in the global equity markets have been determined by the words, and sometimes actions, of the current White House occupant. 

Tuesday (6 November) Mid-term elections would provide a measure of how much support he has maintained since he was elected. 

Jordan Sriharan, Senior Portfolio Manager at Thomas Miller Investment, says history suggests the period immediately after a mid-term election is typically a bullish one for the US equity market.

"Yet this time things do feel very much different. Given how populist some of Donald Trump’s enacted policies have been, were we to see the US Congress split, financial markets might find some relief. 

“All of this takes place in the backdrop to what has been a stunningly weak October for the S&P500 where the US equity index fell the most in one month since 2011.”

What’s more the US Federal Reserve’s two-day monetary policy meeting is also due this week, although the Mid-Term election has forced back the meeting by a day to Thursday. 

“The Fed has raised rates three times already this year and is not expected to raise them at this meeting. Financial markets expect the December meeting to be the next time interest rates are raised, however October’s wobble in US equity markets has lowered the probability,” Sriharan concludes.

 

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