History often rhymes, Trump lost both chambers, is it a rebound or a reversal?
┈➤ Why did Trump lose?
History is rhyming; this is not Trump's first midterm election, but in 2018 he only lost the House of Representatives while still holding the Senate.
In the past 30 years, the only time both chambers changed party control simultaneously was in 2006 under George W. Bush. This might not be a coincidence, as in 2003 Bush was engaged in the Iraq war.
Trump provoking conflict with Iran is a reason.
┈➤ Rebound or reversal?
First, I don't think there will be an immediate reversal. Looking at the previous chart, after midterm elections, unless the controlling party in both chambers remains unchanged, historically there is no immediate big market rally.
Fortunately, the simultaneous "change of control" in both chambers happened in 2006, not 2018. After the 2018 midterms, there was a further significant drop, while 2006 was mainly a sideways shakeout.
Second, although the midterms changed the composition of both chambers, the president is still Trump. The previously approved temporary budget runs until the end of December; what Trump's subsequent budget proposals will be remains to be seen.
Third, do both chambers have the ability to stop Trump's actions against Iran? If they do, can it be done in the short term? If done quickly, will the CPI drop in the short term?
Therefore, my subjective judgment is: politically, there may still be some friction time between the two chambers and Trump. If fast, the market could improve in Q1 next year; if slow, then Q2.
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