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Tuesday, December 6, 2022

Wall Street trades higher ahead of key US election

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The focus of attention is above all on inflation, expectations point to the report finally showing a slowdown from 8.3% in September to 8% in October, moving away from the maximum indicator reached in June of 9.1%.

If the beginning of a possible cooling of inflation materializes, the Fed would have less pressure and could lower the accelerator to aggressive rate hikes, which could return optimism to the market.

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At the same time, the debate is growing between the possibility that there is indeed a recession in the United States, or that it is just a slowdown in the economy.

All three major US indices are in bearish territory, from their previous record closing highs. The S&P 500 has lost nearly 20.7% so far this year on concerns that aggressive monetary policy tightening could tip the economy into recession.

The mid-term elections: the key for the markets

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The market is also attentive to the midterm elections tomorrow, Tuesday, since it will determine which political party will have control of the agenda in Congress.. Investors tend to prefer that the president’s party does not have a majority in Congress, since the stalemates that are generated prevent the execution of new regulations.

Historically, a split between the Executive and Congress has meant above-average gains.

Now the impetus is given by forecasts that the Republicans will take control of Congress and stop the plans of Joe Biden and the Democrats that have pushed the economy into a recession with the worst inflation in the United States in the last five decades.

“Under this scenario of election results, we doubt that we will make any material changes to our forecasts for GDP growth, inflation or the fed funds rate as a result of the election,” Wells Fargo economists said.

Source: Ambito

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