This article examines market trends after the US midterm elections and the outlook for USD/JPY through 4 scenarios. It follows the election results and market reaction, as well as key policy developments.
In the US midterm elections in November, the Democratic Party regained majorities in both chambers of Congress and won a total of 5 gubernatorial races in Texas, Georgia, Ohio, Iowa and Nevada. In the US market on the 4th, the Dow rose about 3% and closed at $53,356, while the US 10-year Treasury yield fell to around 4.88% at one point and USD/JPY recovered from the lower ¥157 range to the ¥158 range.
However, the rise in share prices did not last, and on the 5th the Nasdaq 100 fell 6.4% and the S&P 500 also declined 4.4%. Some attributed this to concern over tighter regulation of AI data centers and construction delays, while other factors, including disappointment with AI growth indicators, were also cited.
On the policy front, tax cuts and higher spending will require congressional cooperation, and with the Democratic Party controlling both chambers, additional fiscal expansion is expected to become more difficult. This is expected to reduce upward pressure on long-term yields and weaken the interest-rate support that has underpinned the dollar. The impact of tariffs and the possibility of action through presidential authority also remain relevant. In addition, President Trump announced on the 6th that he would appoint Mr. Miller as chief of staff.