Gridlock is good. That’s the word on Wall Street after Democrats took control of the House of Representatives, setting the stage for a stalemate with…
Gridlock is good.
That’s the word on Wall Street after Democrats took control of the House of Representatives, setting the stage for a stalemate with the Republican-controlled Senate that investors are betting will boost stocks.
The Dow Jones industrial average surged 545.29 points — or 2.1 percent — in Wednesday’s trading. Other indexes also rose, with the S&P 500 mirroring the Dow’s gain and the tech-weighted Nasdaq popping 2.6 percent.
Investors are looking on the bright side of a Democrat-run House, which above all will make it more difficult for sweeping changes and headlines that can destabilize the stock market to spill out of Washington.
“Broadly speaking, Washington is looking to the ramp-up to 2020 and it’s unlikely that either side will grant the other a [legislative] win,” Mona Mahajan, US investment strategist at Allianz Global Investors, told The Post.
While the Democrats will block any more of the tax cuts that have boosted the economy, they also won’t be able to reverse them.
Democrats’ hands will likewise be tied when it comes to rolling back the Trump administration’s moves to deregulate the economy, experts said.
“Democrats are going to start sending up progressive legislation but it’s more messaging than policy,” Jared Bernstein, former chief economist and economic adviser to former Vice President Joe Biden, told The Post.
Some of that messaging is expected to come from US Rep. Maxine Waters (D-Calif.), a fiery Wall Street critic who is expected to lead the powerful House Financial Services Committee.
“I’m sure they’ll hold hearings,” Bernstein said. “But the Senate, if anything, is stronger in the opposite direction.”
Much of the rule-making authority for banks and financial institutions is in the hands of regulatory bodies such as the Federal Reserve and the Securities and Exchange Commission, noted Dick Bove, chief financial strategist at Rafferty Capital Markets.
“They may throw all the fits they want, but they’re not going to do a thing,” Bove said of Washington’s Democratic lawmakers.
Among the big winners in Wednesday’s trading were health care stocks, which surged on the belief that a Democrat-controlled House will prevent the erosion of the Affordable Care Act.
Tech stocks — which had been beaten down by lowered profit forecasts and threats from Trump — also notched big wins Wednesday.
Amazon, a frequent target of Trump, popped 6.9 percent while Google parent Alphabet gained 3.6 percent.
The broad rally follows weeks of turmoil spurred by fears of a global slowdown and political uncertainty, stoked by a daily ration of headlines about trade tensions between the US and China .
Last month, the S&P 500 suffered its worst month in seven years — plunging 6.9 percent — as investors fretted over tariffs, rising interest rates and election uncertainty, despite the US economy’s continued strength, especially in jobs.
Now, investors are hopeful that the economy will keep growing at a healthy clip without extra stimulus in the form of tax cuts — a prospect that had raised worries about deficits.
“It’s Goldilocks with noise,” said Brian Belski, chief investment strategist at BMO Capital Markets. “Everyone can take a breath. Investors can become excessively emotional and headline-driven,”
