Our Hot Take on the Mid-Terms

No red wave. It looks like the GOP will take the House, but that the Senate will remain 50-50, if Laxalt holds his strong lead in Nevada. For the first time in a long time, polls overestimated GOP performance (as did prediction markets and models, which have better track records). Our prediction of one net flip in the Senate may still come true if Georgia goes to a December run-off, and Walker wins. Either way, for markets, gridlock will continue and indeed become more entrenched. No pro-growth legislation would have been possible with a larger GOP win. The Senate result was the simple product of little opportunity; there were few competitive states, and most were defended by incumbents. 2024 will be very different, with the GOP having no competitive states to defend, while the Democrats will have nine. It was a bad day for Trump and his endorsed candidates. The best outcome for markets would be if Trump opts not to run, clearing the way for DeSantis, who would be a strong pro-growth president.