Finance Association News on October 29th (Editor Malan) The US election is divided into two battlegrounds: the presidency and Congress. While the Republican candidate Trump and the Democratic candidate Harris are neck and neck in the presidential competition, the Democrats are clearly at a disadvantage in the battle for congressional seats.

According to the latest polls and market forecasts, the Republican Party is expected to win the majority of seats in the Senate in this year's turnover and retain dominance in the House of Representatives.

This expectation implies that the worst-case scenario for the future of the Democratic Party is losing both the White House and Congress; the best-case scenario is simply having Harris as a "lame-duck" president.

On the other hand, a Republican victory in both chambers of Congress could also mean a significant increase in market risks, especially if Trump is re-elected, as his tariff and spending policies are likely to be quickly passed by the Republican Party.

One-sided?

According to the latest polls from the senior political observation website FiveThirtyEight, Trump's chances of winning this year's presidential election have risen to 53%, with the Republican Party having an 87% chance of taking over the majority of seats in the Senate from the Democrats, and a 53% chance of retaining the majority of seats in the House of Representatives.

The prediction market Kalshi predicts that Trump's chances of winning are 62%, while the chances of the Republican Party winning the Senate and House are 85% and 52% respectively. At the same time, Interactive Brokers predicts that traders also share the same view, that Republicans will sweep both the White House and both houses of Congress.

Unlike the atmosphere when Harris took over from Biden this summer, top pollster Frank Luntz believes that this is related to Harris' incorrect campaign strategy. Currently, her team is focused on opposing Trump rather than emphasizing Harris' strengths, which has weakened Harris and the Democratic Party.

On the macroeconomic front, the financial markets are beginning to guard against the risks that Trump and the Republican Party may bring when they come into power. Due to Trump's promise to cut taxes domestically in the USA and use tariffs as a substitute for taxes, this may disrupt US trade and exacerbate the federal government's fiscal deficit.

Furthermore, Trump also hopes to mass deport illegal immigrants, which may lead to higher inflation, bring greater pressure to the Federal Reserve, and force it to maintain high interest rates for an extended period of time.

Yardeni Research President Ed Yardeni and the company's Chief Market Strategist Eric Wallerstein jointly warned that the bond market may also vote against Washington, as regardless of which party wins the White House and Congress, fiscal policies will expand the already inflated deficit and worsen inflation. The next administration faces the scenario where net interest payments on federal debt will exceed 1 trillion US dollars.