Loading ...Having reviewed the possible scenarios that lie ahead, it’s time to take a look at what lies ahead for markets: to assess the medium-term market impact of the midterms and recommend trade ideas, SG strategists worked under three different scenarios according to the election outcome.
- Scenario 1: Gridlock – GOP Senate and DEM House (most likely): Markets would fear that economy would be more vulnerable from now on with the absence of any further economic stimulus in the event of economic slowdown.
- Scenario 2: Blue Wave – DEM Senate and DEM House: Markets would stir on speculation of a lame duck presidency and potential impeachment proceedings. Potential upside risk on Infrastructure.
- Scenario 3: Red Wave – GOP Senate and GOP House (least likely): The least expected scenario for the market, which would probably trigger a short-lived risk-on environment. Trade tensions and Fed tightening will quickly be back in the market focus—-[
- -[if a red wave would yield only a short term risk on environment how will a spli congress cause upside of between 11% and 14%-??]
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- Looking ahead, barring no major upsets, analysts at Deutsche Bank and other Wall Street banks see potential for the market to rally into the end of the year, with some analysts who were only recently calling for an extended losing streak now seeing potential upside of between 11% and 14%. But then again, with so much uncertainty between now and then, market returns – and analysts’ expectations – could shift dramatically between now and then.