Leon: The overall victory of the Democratic Party in the US midterm elections is expected or favorable to bond performance

The Zhitong Finance App learned that Lyon released a research report saying that the Democratic Party won a historic overall victory in the US midterm elections, winning the House of Representatives, the Senate, and most governor positions. The bank believes this reflects voters' strong dissatisfaction with Trump's second-term policies. The Democratic Party's victory in the House of Representatives was long in line with market expectations, but the shift of 7 seats in the Senate to the Democratic Party still exceeded expectations, which would hinder the president's policy progress over the next two years and may trigger a series of congressional investigations.

The bank pointed out that although the Asian market had early concerns about election results, historical data showed that after the 19 US midterm elections since 1950, the S&P 500 index recorded positive returns in the following 6 and 12 months.

Lyon believes that the Democratic Party's control of both houses of Congress may help reduce additional fiscal expenditure and narrow the fiscal deficit slightly. It may also slightly depress US economic growth, thereby favoring bond performance. This will help curb the short-term weakness of the US dollar, but it will put pressure on emerging market currencies such as India and Indonesia that have structural external deficits.