US midterm election: what to expect

Polls give a 70% probability to a split Congress, with the Democrats getting the control of the House of Representatives and the Senate remaining in the Republicans’hands.

Highlights:

  • Polls give a 70% probability to a split Congress, with the Democrats getting the control of the House of Representatives and the Senate remaining in Republicans’ hands.
  • Such a scenario would imply virtually no scope for big legislative action on the fiscal front. Democrats and Trump’s support may give rise to more interest on infrastructure spending, but finding a deal in the Congress will be hard. A much more likely outcome is some revision in drug prices.
  • Bashing China is popular also among Democrats, so a softening of the stance is very unlikely. The approval of the new NAFTA should be guaranteed too, as Democrats have not yet expressed objections to the deal. A Democratic win will increase opposition to tariffs on auto.

Download the full publication below

US MIDTERM ELECTION:
WHAT TO EXPECT

RELATED INSIGHTS

US INFLATION: RISING, NOT SOARING
Since the beginning of the year financial markets have started increasingly to worry about a sudden and strong re-turn of US inflation. Behind this stands the double boost from domestic demand coming from the widely expected re-opening of the economy in spring and the large fiscal stim-ulus the incoming Democratic administration will most likely deliver.
CHINA’S Q4 GDP GROWTH SURPRISED ON THE UPSIDE, BUT RISKS TO THE OUTLOOK HAVE INCREASED
This morning, China published its Q4 GDP growth alongside with December monthly activity data. Q4 growth accelerated to 6.5% yoy which lifted total 2020 GDP to 2.3%. December real activity data were more mixed. While exports came in strongly, important domestic demand components were a bit unsteady.
COVID-19 FACTS & FIGURES
US President-elect Joe Biden has unveiled a $1.9 trillion stimulus package proposal. Following the recent increase in cases, China has imposed new restrictions and lockdowns in the Hebei province. Canada has implemented new restrictions and a provincewide curfew in Quebec that will last until February 8. German Chancellor Angela Merkel warned that the recent rise in Covid-19 cases could force the country to prolong the nationwide lockdown until April.