The recent (partial) recovery in the stock market owed something to hopes of GOP gains, or latterly, even a sweep, in the midterms. If so, investors will have been, at least in part, disappointed. Market weakness today (at least at the time of writing) reflects this disappointment, the (related) decision to take some profits, and, of course, continued uncertainty (something investors do not like), as this country’s incredibly sophisticated electoral machinery continues to dribble out results.
If the GOP succeeds in winning even a narrow majority in the House, investors will probably be relieved that the danger of additional tax increases has passed for now. And while supposedly serious people tend to fret about gridlock, that won’t bother investors unimpressed by the current administration. A Republican takeover of the Senate would be icing on the cake. Whether victory in either or both would mean that markets would rise from now (apart maybe for a brief relief rally), I wouldn’t like to say. A lot is happening at the moment, quite a bit of it bad. Disclaimer: I am a lifelong pessimist.
Should the Democrats retain the House, it’s difficult to imagine that there would be much in the way of investor rejoicing for reasons that are too obvious to recite, unless, perhaps, such a result were to be interpreted as increasing the chance of a Fed pivot.
One thing to remember is that much of this administration’s attack on free markets, particularly in antitrust and climate policy, is conducted through the regulatory state. And, regardless of challenges to any future appointees from a GOP-controlled Senate, the people already in place are well-positioned in agencies such as the SEC or FTC to build on the damage they are currently doing.
Those hoping for relief from regulatory excess would (for now) do better to look to the Supreme Court.