Wall Street is pointing down, at a time when the outcome of the US midterm elections is still unclear.
From the first indications, it emerges that the Republicans, as expected, will take control of the House of Representatives. It is head to head between Republicans and Democrats, however, in the Senate.
On how the situation is evolving, a comment comes from Maria Municchi, manager of M&G (Lux) Sustainable Allocation Fund, M&G Investments.
Municchi writes in a note that “the midterm elections in the United States seem to want to keep us in suspense until the very end, especially as regards the Senate, where the Democrats hold a narrow and potentially fragile majority”.
The manager of M&G Investments points out that “the state of the US economy is at the forefront of the minds of most voters, especially the rush in consumer prices and the risk of a recession”.
In this context, “if the Republicans conquer one or both houses of Congress, we could enter a period of legislative inaction on important issues such as taxation, stimulus measures and the debt ceiling. Such a result could give the Fed greater influence on economic policy at a critical time for the country ”. In any case, according to Manucchi, “the market volatility linked to the outcome of the elections will be limited”.
In his opinion, “investors will focus more on US inflation data, and in particular on any signs of inflation moving away from expectations. We expect a confirmation of the downward trend and an assessment of the areas in which inflation remains more stable, confirming the recent message from the Fed ”.
From the first results coming from the US midterm elections, which were held yesterday, Tuesday 8 November, it emerges that the predicted red wave – or a great victory for the Republicans – does not seem to have materialized, while the former president of the United States Donald Trump, who foretold the arrival of “a huge announcement next Tuesday, November 15”, already speaks of fraud: “Is the same thing happening that happened in 2020 with electoral fraud?” asked and wondered Trump, launching the message from his social platform Truth.
In addition to the US midterm elections, investors are looking at the two big news coming from the corporate America front: Disney crash, which slips by more than 8% after publishing the accounts of the fourth fiscal quarter, which have proved worse than expected.
Still protagonist Elon Musk, CEO of Tesla and now also of Twitter: from the documentation filed with the Sec, it emerged in the last hours that Musk has sold other Tesla shares for a value of at least $ 3.95 billion after completing his acquisition of Twitter .
Shares sold by the number one electric car maker were 19.5 million. By 2021, Musk had sold nearly $ 22 billion worth of Tesla stock – in that year, the EV giant’s stock jumped more than 50%. This year, the new Twitter owner sold more than $ 8 billion worth of Tesla stock in April and about $ 7 billion worth of stock in August. The stock recorded a loss of approximately 0.80%.
Rally instead for Meta, which takes more than 6% after the announcement of the maxi layoffs arrived by the CEO Mark Zuckerberg. Meta is already putting 13% of its staff at the door, or more than 11,000 employees.
Zuckerberg, in the spotlight with his metaverse anxiety, responsible, among other things, according to several strategists for the Meta stock crash (over -70% since the beginning of the year), broke the news with a letter sent to employees.
Yesterday Wall Street, on the day of Election Day, precisely of the US midterm elections, closed the session positive, with the Dow Jones jumped by more than 333 points (+ 1.02%), the S&P 500 rose by 0.56% and the Nasdaq up by 0.49%.
“The reaction of the financial markets to an eventual Republican victory should be weak, as the outcome in the House of a Republican victory is already widely expected, and the Senate outcome would make less difference if Republicans control the House – commented Jan Hatzius of Goldman Sachs in a note – A Democratic victory in the House and Senate would probably weigh on the shares instead, as market participants could anticipate a further increase in taxes on companies ”.
Focus also on the note from Michael Wilson of Morgan Stanley Investors, one of the top strategists of the high world of global finance who deserves credit for having prophesied this year’s collapse of Wall Street.
With polls indicating that US midterm elections will usher in Republican victory in at least one of the two houses of Congress, Wilson believes such an outcome could assist a market characterized by lower Treasury yields and stock prices. higher: a combination that would ensure the continuation of the current bear market rally. (bear-market rally).
Wilson warned, however, together with the Morgan Stanley team of strategists, that, before the official results of the elections, which will be known only in the next few days, also considering the wait for the publication, on Thursday 10 November, of the data on the inflation measured by the CPI (consumer price index), the markets should face short-term volatility.
Anxiety over the release of US inflation data is high, as traders and investors are wondering if Jerome Powell’s Fed will announce in December a tightening perhaps less than the 75 basis points that was enacted last week for the fourth consecutive time.
It is hoped for less aggressive rate hikes after the Fed raised rates by 75 basis points on November 2, bringing them to the new range of 3.75% to 4%, a record since 2008.
On the fixed income market, 10-year Treasury rates rise to 4.14%, while two-year rates have moved slightly to 4.674%.