Prospect of big U.S. economic stimulus package looks dim as Democrats struggle to take control of Senate
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But Porter and others were diligent to note that while the situation remained speculative, and the predictions of a “blue wave” that would usher in a Democrat-led Senate had not come to pass, there were some reasonable conclusions to draw.
Avery Shenfeld, chief economist at CIBC, wrote on Wednesday, “the Republicans have retained enough support in the Senate to still have a lot of sway in shaping a second package, regardless of who ends up in the White House.”
He suggested House Democrats may decide to “move in the direction of a smaller, but politically feasible bill,” and predicted it could be in the range of US$1 trillion to US$1.5 trillion.
Shenfeld also suggested that with the campaign over, the dynamics in the U.S. Senate may shift, and Republican leadership may be more willing to allow a larger bill to come up for a vote.
“Although the final Senate results are not yet known, the Republicans’ ability to retain a major influence in that body means that political change on other issues is also likely to be less decisive, even if the White House changes hands,” he wrote. “So those looking at the election as a turning point on climate change, energy sector policy, financial services regulations, taxation and other issues that have impacts on individual equities or other assets, can count on seeing less dramatic change, if indeed any changes are in the wind.”
Keith Wade, chief economist at Schroeders, wrote that markets already had begun “to factor in a Democrat sweep and a significant stimulus bill,” and the likely growth it could have added to the U.S. economy.
If Trump retains the presidency, and Congress is divided between the parties, Wade predicted less stimulus and the re-ignition of the trade wars, factors which would limit growth.
“For now, no clear result is probably the worst possible outcome from an economic perspective as uncertainty increases and stimulus hopes fade,” Wade wrote.
Financial Post
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