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:
- No interruption in Trump agenda, part of which is market-friendly deregulation and corporate tax cuts.
- S&P 500 continues to rally.
- Red-hot US economy continues at full steam, as new fiscal stimulus is introduced.
- GOP doubles-down on protectionist measures.
- Overheating economic expansion plus import price pressures cause inflation pressure to grow.
- Rising inflation pressures the Fed to raise rates faster than otherwise expected.
- US dollar rises against other currencies, including the Canadian dollar.
- 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.
- An accelerated rise in Canadian rates pushes an already weak Canadian housing market off a cliff.
- 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...