Blue wave meets red wall: Dems take House but lose seats in Senate
Divided US Congress will likely mean less uncertainty for markets
The greatest hopes – and worst fears – of both main political parties in the US went unfulfilled in the midterm elections on Tuesday, as the Democrats were projected to wrest a majority in the House of Representatives away from the Republicans, but at the same time will lose Senate seats.
That is the scenario most likely to shape up after the votes are tallied, and also matches most forecasts ahead of voting on Tuesday.
In the Senate, the Republicans had the 51 seats needed for control, while in the House of Representatives, the Democrats had passed the 218 they needed and had 219 seats.
A divided Congress will be welcomed by markets, analysts say, as it will portend no dramatic policy changes.
Markets in Asia and Europe mostly rose on Wednesday, but analysts warned about the economic impact from gridlock on Capitol Hill left the two houses of Congress split between Democrats and Republicans.
Donald Trump’s Republican party maintained its control of the Senate, but the Democrats regained power in the House of Representatives.
A series of high-profile gubernatorial and Senate elections that showed strong support for progressive Democrats broke early for Trump-endorsed Republicans, a result that helped Trump claim a victory, despite the loss of the House.
Tremendous success tonight. Thank you to all!
— Donald J. Trump (@realDonaldTrump) November 7, 2018
Policy implications are hard to discern, but most analysts see the polarized US politics as reason to expect gridlock in Congress, which means less volatility for markets.
One possible bipartisan policy agenda item would be infrastructure spending, which has been proposed by Trump and is traditionally supported by Democrats. But, depending on the margin of victory for Democrats in the House, even that is unlikely to be immune to partisan obstruction.
The result dooms the chances for another tax cut or making the existing tax cuts permanent. But the Trump administration’s deregulation agenda will likely be protected by officials already in place, which is a positive for the financial sector.
Despite the win for the Democrats in the House, the Republicans far outperformed expectations in Senate races, which will likely vindicate President Trump in his campaign strategy that emphasized the security threat of illegal immigration.
It also may embolden the US president to double down on his other controversial initiatives, including his foreign policy which seeks to challenge a variety of US allies and competitors on trade and security issues.
House Democratic leader Nancy Pelosi – who is set to become speaker, a position she held from 2007 to 2011 – told cheering supporters in Washington: “Thanks to you, tomorrow will be a new day in America.”