As the U.S. House of Representatives gears up for a potentially contentious speaker election, market watchers are on edge.
What Happened: The U.S. House of Representatives is poised for a challenging speaker election, potentially impacting market-related legislative actions. Mike Johnson is expected to be re-elected, but the timeline remains uncertain as the process begins Friday afternoon, MarketWatch reported on Friday.
Terry Haines, founder of Pangaea Policy, expressed concerns that a prolonged election could "cast into doubt for markets whether Congress can achieve anything market-friendly — whether it's on taxes or anything else."
This sentiment echoes the lengthy election process two years ago when Kevin McCarthy required 15 rounds of voting over four days to secure the speaker role.
Despite President-elect Donald Trump‘s endorsement, questions linger about Johnson’s support due to the Republicans’ narrow House majority. Jaret Seiberg from TD Cowen's Washington Research Group noted that Johnson could lose if just two Republicans oppose him. "We do not expect Democrats to make this easy,” he added.
Rep. Thomas Massie (R-Ky.) has already pledged opposition, citing Johnson’s stance on government shutdown negotiations.
Betting markets remain optimistic, with Polymarket and Kalshi giving Johnson high chances of success. However, Haines warns that internal Republican divisions could complicate significant legislative agreements, including the debt ceiling and tax bills. A temporary speaker might be elected to manage essential duties if the election stalls, according to Matt Glassman from Georgetown University.
Why It Matters: The potential delay in electing a House Speaker comes at a time when economic uncertainties are already looming. Economists have raised concerns about the economic strategies of Donald Trump, warning that his policies, known as “Maganomics,” could hinder long-term growth.
This apprehension is compounded by the possibility of a market correction, as noted by Jay Woods, a market strategist who predicts a 10% correction due to factors including Trump’s tariff plans. These economic challenges underscore the importance of a stable legislative environment to navigate potential market volatility.
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