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November 6, 2018

What Happens to the Market if GOP Sweeps?

Edit: ok so no sweep...but I still think we get a milder version of the below...besides THIS IS JUST A THOUGHT EXPERIMENT

Here's a guesstimate for what happens to the markets if Republicans retain control of the House and Senate:

  1. No interruption in Trump agenda, part of which is market-friendly deregulation and corporate tax cuts.
  2. S&P 500 continues to rally.
  3. Red-hot US economy continues at full steam, as new fiscal stimulus is introduced.
  4. GOP doubles-down on protectionist measures.
  5. Overheating economic expansion plus import price pressures cause inflation pressure to grow.
  6. Rising inflation pressures the Fed to raise rates faster than otherwise expected.
  7. US dollar rises against other currencies, including the Canadian dollar.
  8. A weak CAD plus higher US interest rates puts pressure on the Bank of Canada to accelerate - and likely overshoot - its march to 'neutral' rates.
  9. An accelerated rise in Canadian rates pushes an already weak Canadian housing market off a cliff.
  10. Canada experiences its own sub-prime crisis, spilling over into the general real estate market and the broader economy, causing a long recession.

Let me know your thoughts...

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