Markets welcome US midterm results but too early to say if they will curb Trump

Businesses and investors are going to take quite some time to work out the impact of the seismic result in the US midterm elections. Initially, after some wobbles overnight in the Far East, markets decided to take a positive view. In the US there was some relief that the scale of the Democratic win means president Donald Trump could not dispute the result.

Analysts, always looking for the bright side, also pointed out that previous periods when Congress was controlled by one side and the White House by the other led to policy gridlock and predictable policy, which suited markets quite well.

But the economic and market implications of what happened are going to take time to unwind. The result could lead Trump to rethink his tariff policy and his war aims in the Gulf – both of which have pushed up inflation. But we don’t know yet.

Trump has shown that he can bypass the need for Congressional approval on tariffs and buy time if the courts rule against him. And the president remains in control of foreign policy. Investors betting on a more benign world may be looking through rose-tinted glasses.

And then there is the AI question. The initial overnight wobbles in Far Eastern markets sprang from concerns of greater AI regulation as Democrats took over Congress, perhaps inhibiting the extraordinary investment boom which has driven US economic growth and Wall Street revenue higher.

[ Midterm drubbing could prompt Trump backlash abroadOpens in new window ]

Data centres linked to AI were also an issue locally in many areas, with voters objecting to the impact on electricity and water and the lack of local spin-off benefits.

It would be a step too far to call this a vote “against AI”, but this political factor is worth watching, nonetheless. The bromance between the tech bros and the White House could start to cool. And the data centre issue is now firmly on the political map.

In a logical world. the midterm vote would lead Trump to pull back on some of the polices that have fuelled inflation and, in some cases, favoured business. But logic is a scarce commodity in today’s White House.