Market reaction to US midterm elections should be quite muted – Danske Bank

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Today, the focus is on the US midterm elections. Economists at Danske Bank do not expect the election result to be a major market mover in the near-term.

“Republicans are favoured to win control of both House and Senate, although the Senate race remains a close call.”

“If republicans win the Senate by a slim margin or if Democrats are able to retain the Senate, market reaction should be quite muted, as major changes in fiscal policy would be difficult to pass.”

“The (modest) risk-scenario for markets would be a clear victory for Republicans also in the Senate, as this could increase the risk of more expansionary (and inflationary) fiscal policies amid the looming recession.”

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