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Wall Street liked what happened in Tuesday 's elections, figuring that the Democrats who will now be able to control the House can keep Donald Trump' s more destructive tendencies – on things like trade, for one – in check.
Wall Street does not know Trump.
The Dow Jones industrial average rose 545 points on Wednesday, to close at 26.180. And Tuesday's overnight futures markets moved even more dramatically as the election results were coming in.
It looked like someone had a yo-yo in traders' hands.
Wall Street is getting ahead of itself. If traders are expecting calm after the storm, they will end up being capsized.
For one thing, Trump will not have a little thing like defeat in an election hold him back. This guy has been through embarrassing divorces, corporate bankruptcies, scandals and more scandals, and has always come back on the bright side of things.
The bright side that he'll see in this election?
For one thing, Trump got a big majority in the Senate. And Cabinet appointments, appropriations bills and the future of the Supreme Court of the Supreme Court of the Supreme Court.
There 's also this point that will be part of Trump' s ego that 's gotten away in the House in the 2010 midterm election.
Trump's Republicans lost only 34 seats. "What a victory!" Trump must be thinking. (In truth, the Democrats were so disappointed they did not get anywhere near the so-dubbed "blue wave" victory they were hoping for.)
So if the Chinese think they are going to see you again, they are going to be very disappointed.
Here's what congressional gridlock, with Republicans controlling the Senate and Democrats the House, will mean to you, according to Goldman Sachs.
- No major changes on taxes (which means the federal debt will get worse).
- Government spending will stay at current levels (which means the federal debt will get worse).
- No deal on infrastructure (which will help the deficit).
- Health care will be a major issue that maybe – the two parts can reach an agreement on (but do not count on it).
- No changes in regulations because the House may pass bills but the Senate will reject them.
- Federal spending deadlines will get trickier as brinkmanship abounds. The next deadline is Dec. 7.
Do you know how this election had so much to do with money issues? Politics mirrors life.
The big dynamic in this election was the economy.
If there are jobs and the voters are happy, you only lose 34 seats in the House and 63. But here's the tricky part for the president in 2020. (Yep, it's time for the next election.)
Most administrations like to have the economy start up slowly and speed up in the next presidential election.
Trump's impatience upon being elected in 2016 may have been successful.
President George W. Bush lost to Bill Clinton in 1992 because he did not feel like it was growing.
Trump might be out of step, and the economy could be waning by the time his re-election is decided.
Which stocks will benefit directly from the election results?
If the Dems and Reps can get together on an infrastructure plan (not likely), industrial and materials stocks will benefit. Drug stocks will be hurt if not incompatible.
And if Trump's trade policies, which many, including me, are dangerously aggressive, are companies such as Caterpillar, Boeing, Apple and any other outfit that does business overseas might benefit.
If I sound negative, that's because of all the ill will. But if the Democrats play their cards right, they might actually get something out of it.
During his lifetime, Trump has not been locked into any particular political philosophy. He bends.
And it's time for some bending by both sides in Washington.
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