The Trump Trade is On, Not Ossoff
With victories in Georgia and South Carolina, it’s four for four for the GOP in congressional special elections. The GA-06 contest was the most expensive congressional campaign in history, in which Democrats sought urgently to unseat a GOP incumbent in a district Trump carried by only 1.5%. Republican Handel won by a larger-than-Trump 3.7%, despite a funding disadvantage. This shows GOP representatives and senators need not distance themselves from Trump in the legislative battles to come – reforming Obamacare and cutting taxes. But markets have thrived on Trumpian chaos, which exerts a demand effect on the GOP congress to accomplish something. These elections take some of the pressure off the GOP, but put pressure on red state Democrats to compromise on tax cuts. In the meantime, signature Trump trades – surging forward earnings and narrowing risk-preference indicators – keep moving forward.