This election not only represents the "midterm exam report card" of Trump's two years of office, but also determines the pattern of American politics in the next two years. The election results will be released in turn on the morning of November 7, Beijing time, and are expected

November 6, US midterm elections will officially kick off. This election not only represents the "midterm exam report card" of Trump's two years of office, but also determines the pattern of American politics in the next two years. The election results will be released in turn on the morning of November 7, Beijing time, and are expected to have an impact on multiple markets such as global foreign exchange, gold and stocks.

Senate , House House affiliation is the focus of the midterm elections. Currently, the Republican Party occupies a majority of seats in the Senate and House of Representatives at the same time. However, from the analysis of seats in this election, the election situation between the two houses is completely different, and the two parties have the advantage.

1. What important time points should be paid attention to in this election?

The United States will hold a midterm election vote on November 6, Eastern Time, and the voting deadline is as follows.

. According to the history of previous elections, the mainstream media export poll may be released at the earliest around 6:30 Beijing time on November 7th. The vote counting results of each state are usually released one after another at around 20:00 Eastern Time on November 6 (about 9:00 Beijing time on November 7). Usually the election situation is basically clear at noon on November 7, Beijing time.

Usually when export polls are released, vote counting results of key swing states are released, and a certain party obtains a key number of seats, the market will fluctuate accordingly.

2. How important is this election?

Although this election is just a midterm election, its importance cannot be underestimated. Both its political influence and market influence are very huge, and it can even be said to be comparable to the presidential election.

Political influence is comparable to the presidential election

From the perspective of political influence, this election can be seen as an evaluation list of the American people for two years of President Trump's office, and it also determines the pattern of American politics in the next two years. On the one hand, if the dominance of the Senate and the House of Representatives falls into the hands of the Democrats, it means that Trump's fiscal stimulus and immigration restrictions will be difficult to pass in Congress, US economic growth will also be hit, and the US dollar and US stocks will also decline. On the other hand, the Republican Party’s defeat in this election may spread to a new round of presidential elections in 2020, when it will be more difficult for Trump to get re-election.

In fact, if the Republican Party loses too much in the election, it may even lead to Congress launching impeachment procedures against Trump - it is still unknown whether Trump can end his four-year term safely by then.

Click to read "The US November midterm election is approaching, and six key issues are emerging"

Market influence will exceed previous

Given the above-mentioned election political impact, it needs no need to say much about the market influence it brings. More importantly, the market impact of this midterm election will be even greater than that of previous sessions.

Barclays strategists said the options market is expected to fluctuate by 1.6% on midterm election night. Generally speaking, financial markets rarely experience major fluctuations before and after the US midterm elections, and the above market positioning is worthy of attention. This reminds us of the drastic fluctuations in the market during the 2016 presidential election in the United States.

Barclays pointed out: "A few weeks ago, the S&P 500 index's variance swap structure showed a significant rebound, indicating that the market is digesting the impact of related events. Assuming forward volatility is concentrated on the rise all day on Election Day, this will correspond to a 1.6% volatility. Although it is quite moderate, considering the current volatility level is rising, it is difficult to predict how much volatility will be caused by political events."

Goldman Sachs analyst Rocky Fishman also pointed out that the short-term implied volatility of US stocks has been very high recently. The implied volatility of parity options on November 2 was 31, and the implied volatility on November 9 after the midterm elections was 27. In fact, looking back at the sharp fluctuations in the US stock market in recent times, it is not difficult to feel the tension in the market before the midterm elections. Goldman Sachs directly pointed out: "The concerns about the election may be one of the reasons for the decline in the stock market."

click to read "The influence of the US midterm election is comparable to the presidential election, and the market may fluctuate violently"

3. What tricks Trump has taken to win the election?

In order to win the election, Trump has been using "special tricks".Huitong editor briefly sorted out the following:

① Send heavy troops to force the "immigrant caravan" to retreat. Trump recently claimed that he could send up to 15,000 troops to the U.S.-Mexico border to stop a "caravan convoy" of Central American refugees. As soon as these words came out, public opinion was full of doubts. Most American public opinion believes that the Trump administration is actually using their usual tricks to create panic and canvass the midterm elections that will arrive on November 6.

② "Sudden" tax reduction commitment. Trump promised to submit a proposal to Congress for a 10% tax cut for the middle class the week before the midterm elections — but ironically, Congress is now recessing, and it was unheard of before Trump announced the news.

③ Delusion to abolish “ birth citizenship ”. Trump also claimed that he would rewrite the constitution through executive orders and abolish the United States' "birth citizenship rights", but anyone who has a considerable understanding of the law believes that he does not have such power. There is no doubt that this is just a trick to win votes.

④ Bomb Powell. The recent sharp drop in US stocks has made Trump unable to sit still, so the bombardment against Federal Reserve Chairman Powell has appeared one after another. Although Trump, as the president of the United States, is not qualified to interfere with the independent Fed, his continuous criticism of the Fed's currency normalization has also caused market concerns. But in fact, this is mostly just finding a reason to excuse yourself and a "scapegoat" when US stocks plummet and the US economy may face a crisis.

4. What is the current election situation?

Currently, the Senate and House of Representatives are in both houses. Judging from recent polls, the Democratic Party has a higher approval rating and its voters are more motivated to vote. According to a report by NBC on October 21, the media and the Wall Street Journal poll conducted on October 14-17 showed that the Democrats control the House of Representatives' approval rating was 50%, while the Republicans were only 41%, 9 percentage points behind. This is also more in line with historical laws - usually in midterm elections, out of dissatisfaction with the political achievements of the ruling party, voters of opposition parties are often more motivated to vote.

However, the 2016 election has proved that the poll is "unreliable". Moreover, the constituency setting in the midterm election is actually more conducive to the Republican Party, which cannot be reflected in the poll support rate. ——U.S. constituencies are usually divided every 10 years. For election interests, the parties that preside over the division often divide multiple areas that are geographically incoherent and have different administrative divisions into one constituent district, or divide the same district into multiple constituencies, so that hostile parties cannot obtain more seats even if they have higher support rates. In 2010, the constituency division was mainly presided over by the Republican Party (the constituency division once every 10 years).

All seats in the U.S. House of Representatives (435 seats in total) will be re-elected, and one-third (35) of the Senate seats (100 in total) will also be elected.

Based on existing seats and district elections, Republicans have a greater chance of winning a majority in the Senate, while Democrats are more likely to win a majority in the House.

Specific election analysis, please read "Understanding the US mid-term election situation in three minutes: How the two parties of the donkey and elephant will stir the market"

In fact, Trump has also foresawed this result in advance. So on November 2 local time, when Trump delivered a speech at a campaign rally, he rarely publicly admitted that "the Republican Party may lose control of the House of Representatives after the midterm elections." "This (losing the House) may happen, it's possible. We did a very good job, we did a very good job in the House, but we could lose it." But then he said he didn't care too much, "Don't worry, I'll find a way to solve it."

5. What advantages do the two parties have in the election?

click to read "What is the chance of Trump winning the US midterm election? You need to understand these five pictures first》

6. Market impact

There is no doubt that this midterm election will be the topic of the market’s most concerned recent times, and will also affect the direction of global foreign exchange, gold, stocks and other markets.

Simply put, according to the recent polls and institutional views, the current general expectation of the market is that the Republican Party is likely to maintain a majority in the Senate, while the Democrats seize control of the House of Representatives. If the final result meets this expectation, Trump's ruling power will be weakened and policies such as fiscal stimulus may be more difficult to pass in Congress, affecting U.S. economic growth. So this result theoretically suppresses the US dollar and US stocks, which is good for gold. However, the editor of Huitong.com believes that in fact, the market impact of this result may be short-lived and limited - because this expectation has been partially digested.

If the election is upset and unexpected situations occur - the Republicans win majority in both the Senate and the House of Representatives, or the Democrats win majority in both the House of Representatives at the same time, then market volatility will inevitably increase - especially the latter result, which will probably cause gold to soar, and the US dollar and US stocks will suffer a big blow.

Article source: Sina Finance