a result that will likely temper Democratic spending and regulation but set up a bruising fight over raising the US debt ceiling next year.
While macroeconomic concerns and Federal Reserve monetary policy have been the dominant forces behind market moves this year, Capitol Hill politics could exert influence on asset prices.A strong performance by Republicans would likely allay investor concerns about higher fiscal spending exacerbating inflation and raise the chances of the party freezing spending via the debt ceiling, analysts at Morgan Stanley wrote this week.
Average annual S&P 500 returns have been 14 per cent in a split Congress and 13 per cent in a Republican-held Congress under a Democratic president, according to data since 1932 analysed by RBC Capital Markets. That compares with 10 per cent when Democrats controlled the presidency and Congress. “This will almost certainly be the end of the tax rises the Biden administration had been talking about imposing on US corporations and the well-off,” said Mr Cole.
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