Wall Street's Take on the Midterm Elections


What is Wall Street's perspective on what might happen November 7? Here are the key takeaways from a Prudential Securities conference call held yesterday by the firm's Washington research term.

  • There's a 2 in 3 chance of the Democrats' taking the House and a 45 percent chance of their taking the Senate.
  • There's some evidence of Republican support hardening and independents' resistance to the GOP softening. Republican losses could be limited to 20 House seats and three or four Senate seats.
  • GOP retention of both the House and the Senate is the least likely outcome.
  • Don't expect a big market response to a Democratic takeover, especially with the Bush tax cuts safe until 2010.
  • Do expect a more protectionist Congress, which will make trade deals tough to do.
  • Expect a lot of Democratic "noise" over China (outsourcing) and Wal-Mart (employee benefits).
  • Other than minimum-wage legislation, there's not a "lot of low-hanging fruit" for triumphant Democrats to gorge themselves on.
  • If they take the House, Dems could get off to a slow start. There could be many leadership challenges as well as lots of committee renaming.