Rudi’s View: Less Than 30 Days Left

Rudi's View | 10:00 AM

Some things might change post the US Midterms, but many things will remain the same

By Rudi Filapek-Vandyck, Editor

We are now less than 30 days away from the US midterm elections on Tuesday 3 November.

If the polls are correct, President Trump's record-low approval ratings are paving the way for a significant victory for the Democrats.

It looks like the Republicans are poised to lose control of the House of Representatives, but a clean blue sweep that changes control of the Senate too has become a genuine possibility.

Pre-election polls have lost a lot of credibility in recent years, but betting markets in the US are pointing in the same direction.

Bets placed on Polymarket currently imply a 93% chance that the Democrats will gain majority control of the House and around a 68% chance they will also gain control of the Senate.

For investors, both in the US and elsewhere, including here in Australia, what matters most is how the election outcome might affect current markets and trends.

Healthcare Versus Data Centres

While most investors will await the actual outcome before making any changes to portfolios and strategy, recent outperformance by the healthcare sector is arguably the most direct link to an anticipated Democratic election victory.

The Republicans under Trump have done their best to wind back and undermine previous administrations' healthcare programs.

A return of Congress to Democratic control would likely make reinstating what has been eroded a priority.

Fund flows in and out of specific sectors in Australia are increasingly intertwined with positive and negative momentum trades in US markets.

Hence, it's probably safe to say that the spectacular rally in CSL ((CSL)) shares since mid-August has been partially driven by election dynamics in Washington.

One key negative consequence might come through greater scrutiny of AI and data centres, which presents a dilemma for investors and politicians alike, as AI remains a key driver of US economic growth and equity markets.

But whoever controls Congress still needs to work with the sitting president, and Trump retains the power to veto legislation he doesn't like.

The latter suggests predicting what may or may not change won't be easy. As financial markets are forward-looking, there's always the chance that they start pricing in the possibility of a Democratic president taking office in early 2029.