The big risk after the midterms is that emboldened Democrats try to leverage the debt ceiling to achieve their policy aims, raising the possibility of a debt default. Admittedly, Republicans may lift the debt ceiling while still in control of Congress. But Democrats could still use the annual appropriations process to push their priorities, risking an extended government shutdown and/or looser fiscal policy. Investors may find some comfort in other areas, as a Democratic Senate could block Trump’s future nominations to the Fed.
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