US: All eyes on election results – Nomura

Analysts at Nomura point out that tonight we will begin to get the US midterm elections real results after polls start to close at 6pm EST and there will be lots of media coverage and the challenge will be making sense of the results.

Key Quotes

“A number of press sources are likely to aggregate election results.”

“If there is a strong trend one way or the other that may be clear relatively early. Note that if actual election results are in line with the base case forecast, such as the Democrats taking the House, then the predicted probability of that outcome should increase towards 100% as the results come in.”

“It is worth noting that many of the House seats that are toss-ups are in California, and control of the Senate could come down to the race in Nevada and/or a close race in Texas. In other words, while we may get an early indication of which way the race is leaning, some of the tail-risk outcomes, such as Republicans retaining control of the House, or Democrats taking control of the Senate, may not be decided until very late.”

“We think that if the Republicans retain control of the House markets will react in the same direction as they did to Trump’s election victory in 2016. On the other hand, a return to divided government is likely to weigh on business confidence and we suspect that will be negative for risk markets.”