Columbia Threadneedle: US Mid-Term elections results - What it means for investors?


Columbia Threadneedle: US Mid-Term elections results - What it means for investors?

Melda Mergen, Deputy Global Head of Equities and Colin Lundgren, Global Head of Fixed Income at Columbia Threadneedle Investments comment on the outcome of the mid-term elections in the United States and what this might mean for investors.

Melda Mergen, Deputy Global Head of Equities, Columbia Threadneedle Investments

With Democrats taking the House, recent headlines and worries related to tariffs and other geopolitical risks will be replaced with more domestic issues such as the possibility of an impeachment and health care reform. Gridlock is good for equities as the expectations around “nothing will get done” means less additional uncertainty. Although the midterm elections are over, Trump’s presidential campaign will kick in pretty soon, so we will continue to experience elevated headline risks in the market. 

Colin Lundgren, Global Head of Fixed Income, Columbia Threadneedle Investments

Gridlock parade? At first blush, the election outcome appears mostly bond market friendly. A divided Congress will make it more difficult to pass additional stimulus, which bond investors may quickly interpret as less expansionary, less inflationary, and potentially less Fed. A goldilocks election for the markets. Treasuries and risk assets are both grinning. Divided Congress reduces the risk of too much or too little of a good thing (stimulus). Something to be said about moderation, or at least that is what the markets are saying. With election results in hand and largely in line with expectations, the bond market quickly looks ahead to Thursday’s FOMC announcement. No rate hike expected this month, but investors will be looking for language in the statement that highlight the Fed’s concern for changing financial conditions, and potential impact on future policy decisions. 

 

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