Wall Street is betting that Democrats’ resounding midterm victory will empower moderates in Washington, curbing the unpredictability that has rattled markets during Donald Trump’s second presidency. US stocks jumped, with the S&P 500 adding 1.6 per cent, as traders wagered that the stark result would ease political uncertainty. “This isn’t so much of a blue wave as it is a moderate wave,” said Jim Caron of Morgan Stanley Investment Management, noting that far-right and far-left voices would be quashed. Markets have been repeatedly hit by Trump’s policies—from his conflict in Iran to attacks on the Federal Reserve and global trade wars.
The scale of the Democrats’ victory will bring a diverse set of voices, with progressives like Abdul El-Sayed balanced by centrists like North Carolina’s Roy Cooper. “The market is saying we actually put value on a country’s capacity to check itself,” said Daleep Singh of PGIM. Investors also welcomed limits on the Democratic Party’s power, with Trump maintaining wide-ranging executive authority. Trump told reporters he would “get along probably with the Democrats unless they want to be destructive.” Markets took solace in his comments that he had no immediate plans to strike Iran, pushing down oil prices. “The past two years have brought novel risks to the Fed’s independence,” said Michael Feroli of JPMorgan, adding that the change in Senate control should mitigate those risks.
Source: Financial Times Markets · Summarized by HeadlinesBriefing