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πΊπΈ US elections: stocks are waiting for a Β«red waveΒ»β
π΅ Preliminary results show a victory for the Republicans, although the likelihood of a global fall in US stock assets is reduced. It is assumed that the unstable, Β«red-blueΒ» parliament will be negative for the dollar, especially if the new government will shred budgetary spending.
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Nevertheless, speculators can find positives in all political problems. Sharing control of Congress would mean less risk to critical sectors of the economy such as healthcare, energy, and the environment. Major changes to the tax code are also unlikely.
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It is this troubled Congress that will have to find a compromise to form a new federal budget and decide to increase the national debt limit. However, a government shutdown as a result of protracted disputes over any of these issues could be painful for investors, at least in the medium term
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And we remind you that the situation in the stock market and the derivatives market is formed and controlled only by monetary policy.
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The markets certainly like it when the government spends a lot of money, but the Fed is not yet done with the fight against inflation, so today's statistics will be a more important factor. Economists expect annual headline inflation to slow to 8%.
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If inflation falls more than forecast, then the Fed may indeed change its policy. But if inflation doesn't come down enough, the Fed will continue to aggressively raise interest rates to rein in economic demand and the price level.
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If inflation persists, the Fed will need to not only raise interest rates but keep them at that level long enough. The result will be a sluggish recession and lower incomes. And such a background can lead to a fall in stocks, regardless of which party controls Congress or the White House.
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Profits to yβall!