The US midterm elections are well underway, and this is what you should know about this event

The United States has been plagued with skyrocketing prices, increased inflation, anti-immigration campaigns, and the right to abortion. With all these critical issues on voters’ minds, eligible voters cast their ballots on Tuesday, November 8.

These elections take place every two years and the reason for being called midterm elections is because they occur in the middle of the US President’s four-year tenure in office. In essence, with Tuesday’s elections, Americans voted to choose 35 seats in the Senate and all 435 seats in the House of Representatives. Furthermore, 36 states will be electing their governors.

What’s the outlook?

With a majority of 220 Democrat representatives, US president, Joe Biden, admitted that it would be difficult for Democrats to keep the majority. Responding to a question about Democrats holding on to their majority in the House of Representatives, Biden replied, “I think it’s going to be tough, but I think we can.” On the other hand, to regain the majority of the House of Representatives, Republicans need to take over five additional seats; polls suggest that Republicans will be able to overpass the 217 seats.

Elections results

Some results from the midterm election have been finalized and announced already. Nevertheless, it is not uncommon for the results to require many days before being finalized.  

How will the midterm election results affect the US internal fiscal policies?

The election results from 2020 gave the Democrats control over the House of Representatives and the Senate, in turn giving US President Joe Biden advanced credit for passing his laws and the Biden agenda.

If Republicans win the majority of House seats, the US will witness a noticeable shift in its economic policies. In effect, Republican representatives would be voting against laws put forth by Biden’s administration. Republicans have been vocal in their belief of an association between increased inflation rates and increased government spending, and have promised to curb and fight high inflation by controlling government spending. If Republicans are successful in seizing the House of Representatives from the Democrats, this will allow them to implement their economic strategies, which they believe would affect the rising inflation rates.

Per the Republicans, one way to curb inflation is by raising the debt ceiling. The debt ceiling sets a legal cap on the total amount of debt that the federal government is permitted to issue.

Moreover, Republicans have also declared their clear opposition to the Fed’s monetary policy and it is among their immediate plans to call for a stop to the interest rate hikes. If this happens, this would push the Federal Reserve to adopt a less tight monetary policy and fewer rate hikes, resulting in a weaker dollar performance.

How would this influence the US dollar, indices and gold?

The dollar index (DXY) which measures the strength of the US dollar against a basket of major currencies would decline. US indices and shares, such as the Dow Jones Industrial Average (US30), NASDAQ 100, and S&P 500, would witness increases. Like indices, gold and metals pairing with the US dollar would also perform better and witness inclined prices. 

Sources: CNN, Foxnews, CNBC, Al Jazeera

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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