Jittery investors await outcome of midterm elections

Associated Press

LOS ANGELES

The midterm elections are certain to have implications for Wall Street, regardless of how they shape the balance of power in Congress.

That’s because in every scenario there could be winners and losers in key sectors of the market, including banking, pharmaceuticals, companies that would benefit from government infrastructure projects and those that rely on healthy consumer spending, analysts say.

The scenario deemed most likely by recent polls and analyst projections has Democrats regaining control of the House of Representatives and Republicans keeping control of the Senate. The odds are longer for Republicans or Democrats emerging with majorities in both chambers.

“Divided government equals gridlock,” said Terry Haines, head of U.S. policy and political analysis at Evercore ISI. “Gridlock is a good thing for markets because markets like certainty.”

In the scenario where Democrats regain control of the House, major policy initiatives from the White House will be dead on arrival. Compromise could be difficult, especially if the Democrats move to impeach President Donald Trump.

If Democrats take both houses of Congress, they could push to shore up the Affordable Care Act, but any move to reverse the Trump administration’s hefty tax cut on corporations or its steady rollback of government regulations on businesses could be fruitless in the face of Trump’s veto.

Should Republicans remain in control of Congress, it’s likely the Trump administration will try to make the personal tax cuts included in last year’s reform package permanent.