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The Week After

The Week After

Last week, many stayed up till the wee hours of the morning watching the U.S. map fill in with red or blue.

For me, my eyes couldn’t stay open long enough. But there was enough press coverage the following day. So, it was easy to get the low down… quickly.

A good amount of issues remained in the balance based on these results, even though it was just a mid-term election.

 

The results

The major question heading into the mid-terms this time around was whether the Republicans could take a majority in the Senate.

And they did. By a larger-than-anticipated margin.

What is funny about politics (but I guess makes sense since everything runs in cycles) is that two years ago everyone was talking about how the Republican Party was in shambles. But now this. 

I digress.

In the House, the Republicans maintained their majority. They actually gained a larger majority than they previously had. They now have the largest majority since 1945.

One of the main takeaways from the election has to be the general public’s negative view of the president. It seems (and many more versed pundits felt as well) that many voters were putting the president and any Democrat candidate on the same pedestal. And they didn’t like that pedestal. 

But now we are left with a Republican Congress and a Democratic president. That seems like a bit of gridlock is ahead for us. But markets had a good week after the election… and possibly even further out.

 

What’s to come

Gridlock in Washington tends to be music to investors’ ears. Gridlock tends to mean not much is done in Washington and for investors that means less opportunity for harm to corporate sector. So, history shows that gridlock tends to be good for equity markets.

Yes, many huge bills are not likely to make their way through, but some items will likely still get passed.

One thing to be aware of is that the president may pass some bills without putting them on Congress’s table. This will likely provide headlines and some anger to some in Washington.

But given how the election turned out, Republicans will likely be able to push some of their desired initiatives through in the gridlocked state. And given a desire to not ruin the party’s image heading into a presidential election, the president may be forced to concede on some issues.

First, Republicans will likely work hard to alter some of Obamacare. Some of the areas that they may look to target first will be in regards to the medical device tax.  And they may even try to repeal the employer mandate.

Secondly, they will likely look to take some actions that may positively impact the energy sector. Given the one-sided Congress, much action will likely surround trying to expedite pipeline approvals.  This could bode well for the energy sector. But it would also bode well for the U.S. desire to become even more energy independent.

Finally, it wouldn’t be surprising to see some work done in Congress to try and alter Dodd-Frank.

 

Heading forward

Now that the mid-terms are finished, some of the political headlines will likely be focused on the what the lame duck Congress takes care of in December.

And then headlines will quickly turn towards who will run in the 2016 presidential election. These headlines may cause some volatility as the uncertainty to what will happen in 2016 will continue to build.

But for the time being, investors are pretty happy that deadlock has occurred in Washington. And investors will surely relish that for a little while.

 


 

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