Wall Street and Asian markets lost momentum after Democrats in the United States took control of the House of Representatives, gaining the opportunity to block political and economic decisions of President Donald Trump. However, what is happening had a positive effect on European stocks. Growth is expected here and the main European indices already confirm this theory.
Although the election results in the United States were generally in line with market expectations, the prospect of a political deadlock creates some uncertainty for investors. The dollar weakened against most major competitors. The loss of Republicans in the House should increase market volatility most likely in the short term. Democrats will now have the opportunity to investigate Trump's tax returns, potential business conflicts of interest, and accusations related to his campaigns in 2016 and Russia.
Obviously, now Republicans will not be able to cut taxes or amend financial rules. In this case, there is a reason to believe that the Democrats can agree to an increase in public spending proposed by Trump.
Here, opponents have a compromise, so even with such a government, we can expect additional financial incentives. There is also the possibility of a compromise on infrastructure costs. If there are additional fiscal incentives, it will become a fair wind for the growth of the US economy. Under all equal conditions, it should support stocks and the dollar. On the other hand, many investors expect Trump to continue the hard line on tariffs, where he can act without Congress approval.
