Gridlock Is a 'Perfectly Acceptable Scenario' for Markets: Valliere

What You Need to Know

While unlikely, Democrats’ retention of the House would stun Wall Street, Greg Valliere says.
Secure Act 2.0 is likely to pass no matter who wins the House, says Jeff Bush of The Washington Update.

While a GOP sweep failed to materialize during the midterms, “a stunner” in Washington and on Wall Street would be Democrats’ retention of the House, “which is doubtful but not totally out of the question as recounts continue this week,” Greg Valliere, chief U.S. strategist of AGF Investments, said Monday morning in his Capitol Notes newsletter.

The likelihood of gridlock, “a perfectly acceptable scenario for the financial markets — assumes that the narrow majorities in both houses will spin their wheels for the next two years,” Valliere said.

Valliere opined that gridlock “will dominate, with bitter battles over spending that will resume soon.”

Between now and Jan. 3, when the next Congress convenes, “a lame-duck session will heat up over spending; Biden and the Democrats are determined to raise the debt ceiling and agree on a massive budget package before the current deal expires in mid-December,” Valliere wrote.

Another lame-duck item: Secure Act 2.0. “It’s the capstone project for two retiring senators, a Republican and a Democrat,” Jeff Bush of The Washington Update added in an email to ThinkAdvisor. “This is why we believe it has a better-than-equal chance of passing. It’s strongly supported by both parties and will likely get appended to one of the must-pass pieces of legislation.”

As to the midterms, “Regardless of the final count, it’s clear it was not a good night for the GOP. They were challenged by candidate quality issues in statewide elections” for offices like senator, governor and secretary of state, Bush said. “Where they had a better night was in gerrymandered House districts.”