Democrats sweep House and Senate in setback for Trump in midterm elections

Democrats won both the House and Senate in the US midterm elections, in a result that Bloomberg describes as a setback for President Donald Trump. The vote renewed part of Congress without running for President, but gained weight as a political thermometer for the government.

Midterm elections are often read as a test for the incumbent president, as the electorate has a say in the country's direction in the middle of the term. When the opposition takes control of both Houses, the Executive's agenda begins to depend on negotiations with a Legislature that is no longer an ally.

In the same edition of Bloomberg's The Pulse With Francine Lacqua program, the conversation featured four guests from different areas: Morris Reid, partner at Actum; Mike Doustdar, chief executive of Novo Nordisk; Negah Angha, visiting researcher at King's College London; and Emmanuel Cau, head of European and APAC equity strategy at Barclays. The data collected for this article does not include the speeches of each guest, which is why they are not reproduced here.

The final numbers of seats and percentages of votes are also not included in the material collected. For this reason, the focus of this report is the political framework of the result and what it could mean for the markets, and not the detailed reading of each district or state.

In practice, the change in majority tends to alter the relationship between the White House and Congress on issues such as budget, foreign trade and regulation. For listed companies and funds, the relevant point is whether the new composition accelerates or halts decisions that affect costs, revenues and the regulatory environment.

What changes for the investor

For those who invest in the stock market, Nasdaq, interest rates and the dollar, the main factor is predictability. A different composition of Congress than the current one could change the pace of fiscal and trade measures, and these expectations are often reflected in asset prices. The channels to observe are the budget discussion, the trajectory of public debt, tariff policy and the reaction of Treasury yields, which also influence interest rates and exchange rates in Brazil. For those who defend fiscal responsibility, it is worth monitoring whether the new majority is pushing for more spending or for expense control. The facts established do not allow us to estimate the direction or magnitude of prices, and the real effect will depend on how the legislative agenda is designed from the beginning of the next Congress.

Automatically translated from Portuguese.