Looking ahead to the Mid-term elections on Tuesday

The US mid-term elections are going to set the agenda for the rest of Trump's presidency. Yes, trump is not on the ballot papers, but at the moment both houses of Congress are under Trump's Republican party's control. This can change when the results of the mid-term elections are in. The US mid-term elections tend to function as a kind of referendum on the current President . So however you think President Trump is doing will be a good indication of the outcome of the mid-term elections. One interesting statistic that I came across was that of the last 21 mid-midterm elections that have been held since 1934 the President's party has only won an increase in the House three times and in the Senate five times. Statistically, mid-terms are not good for the party in control of the White House.

One indicator that is also helpful in assessing the likely outcome of the elections is the president's approval rating. At the time of writing Trump's approval is currently sitting at 41.9%. You can check out the rating indicator here. Another interesting point to note is the number of Republican's leaving Congress. More Republicans have announced their retirement rather than challenging at the mid-terms. A total of 30+. It must be tough serving with a president like Trump as hie courts controversy with many of his statements. My gut feel is that the Republican Party is going to lose seats. However, will it be enough for the Democrats to take control of both houses? Watch out for high turn outs for the mid-terms. Normally there is a low turnout, but if we get high turn outs from some of the swing states like Arizona, Nevada and Florida that could indicate a swing to the Democrats. Also, higher turnouts by younger voters could favour the Democrats. See here

The outcome

The expected outcome is for the Republicans to keep the Senate and the Democrats to take the House. If the Republicans lose the house Trump is going to have his legislative agenda curbed. No more tax cuts, no wall, no social security and no welfare cuts. So the likely outcome for the dollar in three outcomes below is like this:

  • Both houses kept by the Republican= bullish dollar and stocks om hopes of more tax cuts and infrastructure spending
  • Split houses = No major reaction as this is expected outcome
  • Both houses won by Democrat = mild bearish dollar and stocks as markets realise no more fiscal stimulus coming from Trump