On Tuesday night all of the speculation about the midterm elections will mercifully be over, and there is one potential outcome that is being called a “disaster” for the financial markets.
Over the past couple of years, stock prices have soared to unprecedented levels, and Wall Street has seemed to greatly appreciate the pro-business environment that President Trump has attempted to cultivate. Regulations have been rolled back, corporate taxes have been reduced significantly, and many corporate executives no longer fear that the federal government is out to get them. But after Tuesday, everything could be different.
The most likely outcome appears to be that the Democrats will take control of the House of Representatives and the Republicans will remain in control of the Senate. For what it is worth, Nate Silver is currently projecting that the Democrats have an 88 percent chance of winning the House and only a 19 percent chance of winning the Senate.
But of course he was also projecting a huge landslide victory for Hillary Clinton in 2016.
In any event, a divided Congress would create gridlock in Washington, and according to Wedbush Securities managing director Steve Massocca that would produce “some negative fallout” for the financial markets…
Steve Massocca, Wedbush Securities managing director said there could be some negative fallout from a split Congress, since Democrats would hold committee chairmen seats in the House. “To what extent are they able to disrupt the Trump agenda will weigh on peoples’ minds,” he said.
“Donald Trump, the agenda, is very good for the markets. Less regulation, lower taxes,” he said.
But in the end, such a scenario is not likely to move stock prices too substantially.
However, if the Democrats are able to take control of both houses of Congress on Tuesday, Massocca believes that would truly be a “disaster” for stock prices…
The least likely scenario - a Democratic sweep - is also seen as the most negative for stocks.
“Disaster,” said Massocca.
Normally by now we would have a really good idea of what is going to happen tomorrow, but at this point the polls are all over the place.
For example, the last generic poll conducted by CNN has Democrats up by 13 points, but the last generic poll conducted by Rasmussen has Republicans in the lead…
One day before Americans head to cast their ballots in the crucial midterm congressional elections, two final polls conducted by CNN and Rasmussen have predicted wildly different results.
The final generic poll conducted by left-leaning CNN has put Democrats 13 points ahead of Republicans. Meanwhile, a separate poll carried out by the more right-leaning Rasmussen agency has suggested that Republicans are leading, but by a much smaller margin of one point.
For the record, Rasmussen was more accurate back in 2016, and in only about 24 hours we will find out who was more accurate this time around.
There are some that are entirely convinced that Republicans will be able to maintain control of both houses of Congress, and needless to say that would almost certainly cause a huge surge on Wall Street. In fact, one Nevada lawyer is so sure that Republicans will maintain control of the House of Representatives that he just flew to London and bet $130,000 of his own money on that outcome…
A big political gambler I met in Las Vegas in 2016 is in London betting that the Republican Party will keep control of the U.S. Congress. Robert Barnes is essentially wagering that U.S. pollsters haven’t fixed any of the problems that led them astray during the 2016 presidential campaign.
Barnes, a trial lawyer, lives in Las Vegas, frequenting the city’s sportsbooks, but he has to travel to the British Isles to wager on U.S. politics since it’s not allowed in the U.S. On this side of the Atlantic, the bookies know him as a high roller; the political betting team at Ladbrokes even tweeted his photo to mark his arrival and his 100,000 pound ($130,000) bet on the Republicans’ House majority. Given that the entire U.S. primaries betting market is in the single millions in the U.K. and Ireland, that’s quite momentous.
$130,000 is an enormous amount of money, and so I hope that he knows what he is doing.
On the other side, Nancy Pelosi is so confident about the outcome that she has already declared victory on national television.
But of course many other leading Democrats are extremely nervous right now. They remember the election night debacle of 2016, and they are concerned that something like that might happen again.
Democratic pollster John Anzalone is describing what they are going through as “the bed-wetting phase”…
Haunted by memories of 2016, liberals around the country are riven with anxiety in the campaign’s homestretch. They’re suspicious of favorable polls and making election night contingency plans in case their worst fears come true. Some report literal nightmares about a Democratic wipeout.
“We’re kind of just in the bed-wetting phase now,” said Democratic pollster John Anzalone, a Hillary Clinton campaign alumnus who spent election night 2016 in Clinton’s Manhattan war room.
If the Democrats are unable to take the House, that will probably mean that a late “red wave” has saved the day for the Republicans and it will also probably mean that they will likely increase their Senate majority by a little bit.
In that scenario, we will see a lot more than “bed-wetting” from the left. Their hopes have been pinned on these midterm elections for nearly two years, and a crushing loss could set off a national temper tantrum of frightening proportions.