BlockBeats report: On November 5, the U.S. midterm election results reshaped the power structure in Washington, with the Democratic Party regaining control of both chambers of Congress, while the Republican Party lost full control of both the White House and Congress. Markets responded on Wednesday with increased risk appetite, as the S&P 500 rose 1.6% and the Dow Jones Index gained 3%. Trump also indicated willingness to accept the election outcome and cooperate with the Democrats, temporarily easing concerns over political conflict. However, the election’s deeper impact lies in the checks on Federal Reserve appointments: with the Senate’s confirmation power now under Democratic control, the White House will be limited in its ability to alter the Fed’s composition through new appointments. The Senate Banking Committee, expected to be led by Elizabeth Warren, may also intensify oversight of Chair Warsh and monetary policy transparency.
However, strengthened institutional checks and balances do not necessarily mean a shift toward looser monetary policy. ADP data showed that private sector employment increased by 86,000 in October, exceeding the market expectation of 69,000, while wage growth remained steady at 3.2%. Job switchers saw year-over-year wage growth of 4.8%, indicating continued resilience in corporate hiring and labor mobility. JOLTS job openings rose by 333,000 to 7.523 million, while layoffs declined to 1.641 million, suggesting the labor market has not yet deteriorated broadly. However, ongoing reductions in positions within professional and business services indicate an uneven recovery across industries.
The next key market focus is the non-farm payrolls report due on November 6, which is expected to show an addition of 65,000 jobs and an unchanged unemployment rate of 4.2%. If employment remains stable, the Fed will have more room to monitor inflation; if the data shows a significant weakening, markets may once again raise expectations for a dovish policy stance. The Reserve Bank of Australia’s rate hike this week to 4.85% also reflects that global inflationary pressures have not yet subsided. Overall, the election has reduced some political uncertainty but has not resolved the tension between monetary policy and economic fundamentals.