![]() That could support a rally in 10-year Treasury bonds and help stocks extend their recent gains, they said.Ĭonversely, analysts have forecast that equities would react negatively if Democrats manage to maintain House and Senate majorities, with Goldman Sachs analysts saying there would be risk of additional corporate tax increases weighing on earnings and risk of higher interest rates to counter probable additional spending.Ī gridlock situation would be more positive, analysts have said. If Republicans are able to take control of the House, it means split government with Democrat Joe Biden in the White House, an outcome that historically has been accompanied by positive long-term stock market performance.Ī strong performance by Republicans had been seen as likely to allay investor concerns about higher fiscal spending exacerbating inflation and raise the chances of the party freezing spending via the debt ceiling, analysts at Morgan Stanley wrote this week. While macroeconomic concerns and Federal Reserve monetary policy have been the dominant forces behind market moves this year, Capitol Hill politics could exert influence on asset prices. The stocks had been seen as benefiting in a strong Republican victory. Shares of prison operators Geo Group (GEO.N) and CoreCivic (CXW.N) slumped. Investors pointed to a rise in clean energy shares, reflected in a 1.6% rally in shares of the Invesco Solar ETF (TAN.P) as a potential ripple effect of the outperformance by Democrats, who are seen as friendlier to clean energy regulations. That’s not happening, so I do think it is why the market is struggling a little bit.” "Largely the market and investors had coalesced around this idea of a pretty significant Republican wave. “It’s definitely different than what the expectation was heading into the night," said Walter Todd, chief investment officer at Greenwood Capital. The S&P 500 (.SPX) fell 0.8% in morning trading, while the 10-year Treasury yield weakened and the dollar rose against a basket of currencies. But prospects of a "red wave," which had picked up steam heading into Tuesday's vote, had evaporated and the balance of power in the Senate remained unclear. Republicans were still expected to make gains and likely win control of the House of Representatives. midterm elections, as a better-than-expected showing by Democrats muddies the outlook for issues such as fiscal spending and regulation.Ĭontrol of Congress, which is currently held by President Joe Biden's Democratic party, remained up for grabs early on Wednesday with many of the most competitive races yet to be called. NEW YORK, Nov 9 (Reuters) - Investors on Wednesday were weighing a surprising outcome in the U.S.
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