*HOW THE U.S. MIDTERMS COULD RIPPLE THROUGH THE STOCK MARKET - 🇺🇸 🇺🇸
NEW YORK - Investors are turning their focus to Tuesday’s U.S. midterm elections, which will determine control of Congress and could spur moves in everything from energy companies to cannabis stocks.
Republicans have picked up momentum in polls and betting markets and analysts see a split government - with the GOP winning the House of Representatives and possibly the Senate - as the likely outcome possibly hindering Democratic President Joe Biden's agenda. Traders also appear to be leaning toward a Republican win: a basket of stocks and other assets tracked by advisory firm Strategas that would be expected to do well after a Republican victory have outperformed a counterpart Democrat portfolio, indicating a roughly 70% chance that Republicans win both the House and Senate.
A split government could result in political gridlock that stymies major policy changes, an outcome that investors see as favorable for equities. Regardless of the winner, past midterm elections have ushered in a period of positive market performance, something investors would welcome after a year in which theDivided government could also, however, pave the way for partisan standoffs over raising the federal debt limit that could usher in worries of a U.S. default.
Defense spending is expected to rise regardless of how Tuesday’s vote plays out, given geopolitical tensions such as the conflict in Ukraine. But a Republican sweep sets the stage for spending to rise"significantly," according to UBS Global Wealth Management, versus"moderately" if Democrats retain one or both chambers of Congress.
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