The results of the midterm elections in the United States surprised many in the financial world who had been preparing for a split government.
Now, Reuters reports, Wall Street may need to tweak its plans as the split government is looking far from certain, with the Democrats surprising with quite a few important wins.
Democrats have retained control of the Senate, the report noted, with Republicans likely to gain a narrow majority in the House of Representatives. Yet this will be nowhere near the red wave that many expected these elections to produce.
This means that the energy policy in Washington will likely remain largely unchanged, even though, as Forbes' David Blackmon commented in a recent analysis, it was not the best there is. In fact, many expected a red wave at the midterms precisely because of that energy policy.
"Biden's decision to pump hundreds of millions of barrels of oil from the U.S. Strategic Petroleum Reserve in an effort to mitigate gas prices may have harmed America's energy security, but the visual of his "doing something" to help gas consumers obviously helped Democrats at the ballot box," Blackmon wrote.
Meanwhile, inflation remains a top worry for many investors and, with it, spending plans by the two parties. The Democrats have bigger spending plans, which is why the unrealized red wave was bad news for these investors. Yet the balance of partisan powers is shaping up as thin, which should mitigate the effect of that bad news.
Another priority for investors is regulation and in that respect, too, many are probably disappointed by the midterm results. With a split government, new regulations would be much harder to pass. There is still hope for those who want less regulation: if Republicans win control of the House, with the Senate under the control of the Democrats, passing a lot of legislation could be challenging.
By Charles Kennedy for Oilprice.com
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