Economist Analyzes US Midterm Election Impact on Markets

Morningstar Senior US Economist Preston Caldwell analyzed the potential economic consequences of the upcoming US midterm elections for the House of Representatives and Senate. Caldwell argues that these elections are often overrated in their influence on financial markets when compared to primary drivers like artificial intelligence.

Citing a model from Nate Silver that assigns a 90% probability to Democrats capturing the House, Caldwell suggests that a divided government would likely lead to legislative gridlock and few major policy shifts. He notes that while broad economic impact may be limited, specific changes could occur, such as adjustments to ACA health plan subsidies.

Caldwell also addressed the ongoing US-Iran war, stating that a resolution to the conflict could lower energy prices by easing oil and gas supply constraints in the Gulf. However, he believes markets have already priced in this outcome regardless of which political party controls Congress.