US midterm election: a split Congress
As widely expected, the Democrats took control of the House of Representatives, while the Republicans increased their lead in the Senate. Democrats benefitted from a higher turnout in an election that was framed as a referendum on Trump, successfully mobilizing younger voters and minorities.
- The midterm election delivered a split Congress, with the Democrats getting the control of the House of Representatives and the Senate remaining in Republicans’ hands.
- Such a scenario implies virtually no scope for big legislative action on the fiscal front. A split Congress increases the probability of a shutdown: the first such occurrence could be in Q1 2009.
- Democrats and Trump’s support may increase the likelihood of extra infrastructure spending, but finding a deal in the Congress will be hard. A much more likely outcome is some revision in drug prices.
- On trade, there should be no significant impact. The new agreement with Mexico and Canada will be passed and the Administration’s attitude toward China will not change.