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U.S. Midterm Elections and Gridlock Effects on the Stock Market

Political uncertainty plays havoc on the stock market.

The Election Day on Nov 6 projects a high voter turnout. On Tuesday, the stock market and the bond market will be open and proceed as usual.

The U.S. stock futures were showing mixed trade ahead of the mid-term elections on Tuesday. The Dow Industrial Average future indicated a declining open of 42 points. The S&P 500 and the Nasdaq were also showing a negative open.

The Dow future shows an opening in the positive zone.

The midterm elections on Tuesday will play a major role in the direction of trade. According to forecasts, the Democrats may take control of the House. The Republicans may retain their Senate majority, by a marginal vote.

In early voting, about 35 million people had cast their votes on Monday, says data.

If the Republicans find a majority in both the chambers, the market can expect tax cuts which would be welcomed and improve the market sentiment.

A win for the Democrats may cause pressure on the markets, as some policy reversals passed by the Trump administration can be expected.

Joseph Son, an economic at Merrill Lynch says, “Markets like gridlock”. This may reduce trade tensions, he adds.

A gridlock also means positive gains for the stock market.

Historical records say that a gridlock is good for the market. If the gridlock comes from a divided Congress, it is considered good, while a gridlock at the mercy of a hostile Congress is not very great.

However, strategists consider that a continuous GOP control will be best for the Dow Jones Industrial Average, the Nasdaq and S&P 500.

Across the globe, the markets were showing a mixed trend. In Asia, the Nikkei was showing a positive trend while Shanghai was in the red.

The European markets were also in the negative zone. The Stoxx 600 index showed a 0.4 percent decrease.