DIWALI - EAT, PRAY, LOVE; FORGET THE MID-TERM!

Today is Narakachaturdashi – symbolizes the triumph of good over evil. With ‘good’ reigning, we get into worshipping Goddess Lakshmi, not just for wealth but for bestowing us with all the intangible ‘goods’ of life. Goddess Lakshmi is no doubt, the Goddess of prosperity but prosperity is not only money but prosperity of emotions, knowledge, health, wisdom.

And while India struggles with whether to be ‘materialistic’ or more ‘spiritual’ this Diwali, the rest of the world has its eyes trained on America. Today, as Americans go to vote, tomorrow, we will know whether people supported Trump’s two years of racist and protectionist policies, not to mention hair-brained rhetoric’s and  undiplomatic utterances.  

Mid-term elections, as well all know is like taking a performance test of the ruling Govt – have they done right over the past two years and remain popular or have things changed. But this is not just a survey; its proper election and the outcome has ramification on the next two years.  

There are only three scenarios here –

1: Most likely – the Democrats win the House but the Senate remains with the GOP – it’s an abbreviation used to denote Republicans (abbreviation for Grand Old Party).

2: Maybe – the GOP keeps both the Houses but the majority of the House becomes narrow

3: Most unlikely – the Democrats sweep both the Houses.

If the first scenario plays out as widely expected, naturally, there will be a gridlock as there seems to be no chance of any bipartisan cooperation. Policy initiatives will not move forward, especially Obamacare and Immigration.

Those in the stock market there say that this would be the most ‘bullish’ outcome as US markets have historically thrived in a gridlock Govt. More pertinently, the outcome will become clarity to what the market has been expecting all along and that in itself will be bullish, allowing it to move on.

Yes, there is the worry of impeachment but that might go nowhere as the House alone impeaching will do no good when the Senate, which is likely to remain with the GOP will vote it down.

If the second scenario plays out, when the GOP retains control over both the Houses, the markets will get very bullish as it would mean that policy initiatives will go ahead full steam. Lower taxes and an overhaul of Obamacare will become top priority.

And in the most unlikely scenario of the Democrats gaining control of both the Houses, the markets will turn bearish as it would mean two years of complete uncertainty and undoing all that was done over last two years. But it would mean good tidings like lower prescription drug prices, higher gun background checks and more importantly, legal protection for young immigrants who came to US illegally as a child.

But whatever the outcome, analysts say that Trump will continue to go hammer and tongs behind China. More tariffs are on the anvil post the mid-term; maybe an additional $260 billion on Chinese goods. Thus for Asia, this mid-term will change nothing.

For us Indians, the outcome of the mid-term will have an impact on the Muhurat Trading; more so because on 8^th Nov night, there is the all-important US Fed meet. But a rate hike is expected only in Dec. Thus it could be a quiet Fed meet with all the fireworks happening in India!

Markets, elections, interest rates, everything will remain; best to focus on the festival of lights, collecting a treasure trove of memories with loved ones. Diwali is indeed the time to eat, pray and love!