Thanks to primaries and political forecasts, investors are already considering projections suggesting that Republicans could take control of both chambers of Congress. This means that the White House and Congress would be divided, which markets like. Why is that? You might think that political division isn’t a good thing, but a divided Congress and White House could make it more difficult to pass major laws that could change taxes, government spending, and more. And that could make it easier for companies to carry on with business as usual without worrying about big economic policy changes that could impact their top and bottom lines. You might see markets respond positively in the short term to the election results, but historically, it typically doesn’t last. Instead, everyone will likely be paying greater attention to this week’s inflation figures, which will determine how much more aggressive the Federal Reserve will get in an attempt to bring inflation in line with its 2% goal. This doesn’t mean, of course, that elections don’t matter. This next Congress will help steer the United States through a potential recession, and proposals to tax Big Oil, create a budget that could see spending cuts, and debt ceiling debates (remember that debacle last year?). So, even if markets are looking past this election, it’s still important to vote. Here’s one thing elections won’t impact: the direction of the Federal Reserve. Policymakers at the central bank hold non-political positions. So the Fed will continue to follow its mandate, no matter who is in office.
