Thank you for participating in our survey. Please let us know if you have any feedback or questions.
Quick summary, respondents:
- 74% believe Congress will flip to unified Republican control
- 62% believe a unified Republican Congress would be Risk-on
- 66% view divided party control of Congress would have a negligible effect on market risk
- 37% see growth as the best performing factor under unified Republican Congress
Balance of Power: 74% of the investors polled believe that the balance of power will shift to Republicans in both the House and the Senate, while 21% believe Democrats will hold the Senate and lose the House. This investor sentiment is in line with national sentiment trends. But, as we’ve noted in our election updates, control of the Senate rests in a handful of toss-up races (such as Georgia, Pennsylvania, Arizona and Nevada), where factors outside national sentiment could skew the results.
Market Risk: Under unified Republican control of Congress, 62% of investors see this as Risk-on. Under the scenario where Democrats retain the Senate but lose the House, 65% see this as Risk-off.
We add that irrespective of the midterm election results, macroeconomic policy poses risks as the Fed completes its work and that job slows the US economy under divided government. Fiscal authorities will then be confronted with increasing imbalances affecting working households as much if not more than any other segment of society. The resultant populism likely pushes back against deep spending cuts, especially entitlements despite that being a source growing imbalance (along with flagging revenues from contraction). Post-election sector implications likely break into two phases: the immediate aftermath, and 1H23 when agenda and governance issues become clearer.
According to the results of our survey, 66% of investors believe split party control of Congress would have a negligible effect on market risk.
Best performing factors: Investors see growth (37%) and value (35%) as the best performing factors under a Republican-controlled Congress.
For your reference: We attach a link Larry Sabato’s final 2022 Election forecast, which hit our inbox as were reviewing our survey results. He and the Crystal Ball team believe Republicans will control the 118th Congress. They project a net 24-seat pickup for House Republicans, and 51-49 for a GOP Senate.
