Blackstone's Byron Vienna predicts that equity market investors may face a rude start if Democrats win back the U.S. Senate in the upcoming 2020 elections.
"I think the Democrats are taking over the Senate. Enough information [will be] revealed in the process to induce some of his supporters, as well as many independents, to cast their support for liberal candidates in 2020 state races. "
The forecast is one of ten events that will surprise the markets in 2020 that Blackstone released on Monday. Data shows that turning over the Senate would indeed be surprising to many. PredictIt, the analytics platform, shows that investors have a 72% chance of control of Congress, and seasoned political observer Larry Sabato also believes democratic adoption is unlikely.
He predicts Democrats will take 46 seats in the Chamber and Republicans win 51, with three races in North Carolina, Arizona and Colorado counting as "toss-ups." President Trump wins reelection – when the Vice President casts a tie in the Senate – or a short one if the Democrats can retake the White House.
Control of the Senate could have important ramifications for the markets, especially if the Republicans also lose the White House. Democratic presidential candidates have proposed a number of guidelines, including higher taxes on corporate earnings, higher taxes on assets, and stricter environmental and financial regulations that could weigh on stock valuations.
Equity investors have welcomed President Trump's great achievement in reducing corporate taxes, and many have also praised the government's efforts to reduce regulations for US industry. The S&P 500 index
has grown almost 52% since President Trump won the 2016 presidential election.