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How will U.S. markets react to the midterms?

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U.S. stocks are likely to enjoy an impressive rally this week, as Republicans look set to take the Senate

On Tuesday, U.S. voters will elect representatives for all 435 seats in the House of Representatives and 35 seats in the Senate.

There are also a range of other positions like local governors and mayorships on the table.

Democrats may prepare for a watershed loss. However, investors are expecting a rally of U.S. markets.

Nigel Green from the deVere Group believes Republicans could take at least one chamber in these elections.

The deVere Group is one world’s largest independent financial advisory, asset management and fintech organisations.

“History teaches us that a sitting president’s party sheds some level of power during these elections, splitting the executive and legislative branches of the U.S. Government.”

“This typically results in gridlock as lawmakers are unable or unwilling to agree on major legislation, meaning that substantial laws are either not approved or significantly reduced in scope and impact,” Mr Green said.

U.S. President Joe Biden has urged people to vote Democrat amid rising inflation and cost of living pressures.

In September, the price of basic goods and services increased by 8.2 per cent when compared to the same time last year.

“This is not a referendum; this is a choice.  And the more people we get out to vote, we win. We win.”

JOE BIDEN, U.S. PRESIDENT

Mr Green said some sectors will be more impacted than others after Tuesday’s vote is complete.

“The status quo usually means that corporations can push on with their plans and investments without the risk of everything being upended by new laws and requirements.”

“Reforms to legislation on big tech can be expected to come to a halt due to the gridlock, which “represents upside for the tech stocks,” he explained.

Who is likely to be affected?

A Republican wave across the U.S. could be a win for major pharmaceutical and biotech stocks, which have already capitalised during the Covid-19 pandemic.

Democrats are pursuing a bill to lower prescription drug prices. Biden said the price of prescription drugs has been out of control for years.

“We pay the highest price for prescription drugs than anywhere in the world.”

“The prescription you have from a drug manufacturer in the United States you get at the local drugstore, you can get in a plane and fly to Paris, you can get the same exact drug for less—every other major capital in the world,” President Biden said.

A voter marks a ballot during the primary election and abortion referendum at a Wyandotte County polling station in Kansas City, Kansas, U.S. August 2, 2022. REUTERS/Eric Cox

Wall Street’s energy stocks could see gains if Republicans take either the House of Representatives or the Senate.

If this is the case, a Democrat-led windfall tax on oil producers could be blocked.

“I’ve released millions of barrels of oil from our Strategic Petroleum Reserve, keeping the price down. It’s down about $1.25 and going down,” the President said, as he conceded prices need to drop further.

The oil crisis has been spurred by the war in Ukraine, as major economies like the U.S. and Britain sanctioned Moscow for its so-called ‘special military operation’.

Russia is the world’s second largest producer of oil. However, the west’s sanctions have cut Moscow from the global supply chain, and sent oil prices skyrocketing.

In addition, the Organisation of Petroleum Exporting Countries and its allies (OPEC+), recently made the decision to cut its daily oil production by 2 million barrels.

The OPEC+ group is primarily run by Russia and Saudi Arabia. President Biden said “there will be consequences” over the recent decision.

The reduction has impacted around 2 per cent of global oil demand.

Oz Sultan is a former Republican candidate, who said U.S. markets will respond favourably if there is a sea of red on Tuesday.

“What we’ve seen from the Biden White House is an approach to green energy, which isn’t necessarily sensible.”

“A lot of what his [Biden’s] policy has been is too little too late, and it’s great thinking but if you don’t have sensible policy that affects the change that you want, it’s not going to happen.”

OZ SULTAN, FORMER REPUBLICAN CANDIDATE

Midterm elections have previously heralded positive stock market performances.

However, there are a suite of inflationary pressures and cascading events including the pandemic, conflict in Ukraine and global supply chain crunch, which investors are keeping a close eye on.

How can investors avoid the worst of it?

The U.S. President typically seeks to use the results of the midterms to boost the economy in the third year of their presidency, as part of their bid to get re-elected in the following year.

However, a divided government will make it harder for President Biden to pass his legislative agenda.

Mr Green from the deVere Group said investors should not underestimate the importance of a trusted investment strategy.

“Ensuring your portfolio is properly diversified is one of the fundamentals of successful investing.”

“Having a well-diversified portfolio across asset classes, sectors and regions means you are best-placed to mitigate risks and best-placed to take advantage of important opportunities.”

NIGEL GREEN, CEO OF THE DEVERE GROUP

The midterm report card is set to alter the course of U.S. domestic politics as the 2024 Presidential election looms large.

However, President Biden said there is also something else at stake: democracy itself. 
 
“I’m not the only one who sees it. Recent polls have shown that an overwhelming majority of Americans believe our democracy at—is at risk, that our democracy is under threat.”

“They too see that democracy is on the ballot this year, and they’re deeply concerned about it,” he said.

Costa is a news producer at ticker NEWS. He has previously worked as a regional journalist at the Southern Highlands Express newspaper. He also has several years' experience in the fire and emergency services sector, where he has worked with researchers, policymakers and local communities. He has also worked at the Seven Network during their Olympic Games coverage and in the ABC Melbourne newsroom. He also holds a Bachelor of Arts (Professional), with expertise in journalism, politics and international relations. His other interests include colonial legacies in the Pacific, counter-terrorism, aviation and travel.

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Wall Street hits record highs on low inflation

Wall Street hits record highs on cool inflation and strong earnings ahead of key Federal Reserve interest rate decision

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Wall Street hits record highs on cool inflation and strong earnings ahead of key Federal Reserve interest rate decision

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In Short:
– U.S. stocks rose to record highs on Friday due to lower inflation and strong corporate earnings.
– Key earnings reports from major companies are expected next week, influencing market trends.
U.S. stocks rose to record highs on Friday due to lower-than-expected inflation data and positive corporate earnings.The S&P 500 and Nasdaq achieved their largest weekly gains since August. The Dow saw its biggest jump from Friday to Friday since June.

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The Labor Department reported that the Consumer Price Index was slightly cooler than analysts’ predictions, easing concerns about inflation impacts from tariffs. This development suggests a likely interest rate cut by the Federal Reserve at its upcoming meeting.

Ryan Detrick from Carson Group noted the positive inflation news may facilitate forthcoming Fed rate cuts. Despite the ongoing government shutdown affecting data releases, this CPI report provided much-needed clarity.

Earnings reports are continuing, with 143 S&P 500 companies having reported results. Growth expectations for third-quarter earnings have risen to 10.4%. Detrick indicated a strong opening to the earnings season with a significant percentage of companies exceeding expectations.

This coming week, key earnings will be reported from Meta Platforms, Microsoft, Alphabet, Amazon, and Apple, alongside industrial companies like Caterpillar and Boeing.

The Dow rose 472.51 points to 47,207.12. The S&P 500 increased by 53.25 points to 6,791.69, while the Nasdaq gained 263.07 points, reaching 23,204.87.

Alphabet gained 2.7% following a deal expansion with Anthropic. Coinbase saw a 9.8% increase from a JPMorgan upgrade. In contrast, Deckers Outdoor’s shares fell 15.2% after lowering sales forecasts.

Market Trends

Advancing stocks on the NYSE outnumbered decliners by 2.18 to 1. The S&P 500 had 34 new highs, with the Nasdaq recording 124.

Trading volume was 19.04 billion shares, lower than the average of the past 20 days.


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US stocks face tests from Tesla, Netflix earnings

US markets brace for Tesla and Netflix earnings amid rising volatility and delayed inflation data

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US markets brace for Tesla and Netflix earnings amid rising volatility and delayed inflation data

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In Short:
– Earnings reports from Tesla and Netflix might affect U.S. stock performance next week amid high inflation concerns.
– Increased market volatility arises from U.S.-China trade tensions and fewer S&P 500 stocks in an uptrend.
This coming week, earnings reports from companies including Tesla and Netflix are anticipated to impact U.S. stock performance.
Investors are also awaiting delayed U.S. inflation data, which could test market stability as it remains near record highs.Recent trading activity has shown increased volatility, influenced by ongoing U.S.-China trade tensions and concerns regarding regional bank credit risks. The CBOE volatility index has seen a rise, indicating increased market uncertainty.

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The S&P 500 entered its fourth year of growth amidst these fluctuations, having previously experienced a period of calm. Experts suggest market risks are intensifying as valuations reach peak levels.

Market Volatility

Concerns regarding U.S.-China trade relations escalated last week when the U.S. threatened to raise tariffs by November 1 over China’s rare-earth export policies. President Donald Trump is scheduled to meet with President Xi Jinping in two weeks to discuss these issues.

Despite these challenges, major stock indexes gained ground over the week, with the S&P 500 up 13.3% year-to-date. However, a noticeable decline in the number of S&P 500 stocks in an uptrend raises caution among investors about underlying market weaknesses.

The upcoming third-quarter earnings will be closely monitored, especially as the government shutdown halts economic data releases. Companies like Procter & Gamble, Coca-Cola, RTX, and IBM are due to report. The delayed U.S. consumer price index is also expected to provide crucial insights ahead of the Federal Reserve’s monetary policy meeting on October 28-29.


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Australia’s unemployment rate rises to 4.5 per cent

Australia’s unemployment rate rises to 4.5 per cent in September, prompting calls for potential Reserve Bank interest rate cut

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Australia’s unemployment rate rises to 4.5 per cent in September, prompting calls for potential Reserve Bank interest rate cut

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In Short:
– Australia’s unemployment rate rose to 4.5% in September, the highest since November 2021.
– Economists note a cooling labour market, with fewer job ads and increased participation rate amid rising living costs.
Australia’s unemployment rate increased to 4.5 per cent in September, up from 4.3 per cent in August.It marks the highest seasonally adjusted unemployment rate since November 2021.

Economists suggest that the Reserve Bank should consider another interest rate cut next month. BetaShares chief economist David Bassanese noted a slowdown in employment demand as the labour market struggles to accommodate job seekers.

The number of officially unemployed rose by 33,900 in September, while the employment count increased by 14,900. The labour force expanded by 48,800 people, resulting in a participation rate rise of 0.1 percentage points to 67 per cent, returning to July levels.

In trend terms, the unemployment rate remained steady at 4.3 per cent.

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Labour Market

BDO chief economist Anders Magnusson stated that while the unemployment rate has increased, the labour market is cooling, not collapsing.

He pointed out that the 14,900 jobs added in September were slightly below the average for the past year.

A growing participation rate indicates that rising living costs are prompting more individuals to seek employment. Magnusson said the release confirms a gradual cooling of the labour market that keeps the Reserve Bank on track without necessitating immediate action.

He added that hiring activity is slowing, signalled by a 3.3 per cent drop in job advertisements in September, the largest monthly decrease since February 2024.

Despite this, he does not foresee a rate cut in November.


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