Markets react to Trump's veto threat and 'blue wave' forecast in Congress

Initial estimates of voting results

Even before the official vote count, Donald Trump defined his strategy of action, naming the veto as the key instrument. These words, along with expectations of a shift in the balance of power in Congress, caused indices to fall on financial markets overnight.

As of the morning of 4 November, the situation looks as follows. Around 22:00 New York time on 3 November (03:00 UTC on 4 November), TV channels MS NOW, CNN, NBC and CBS forecast a Democratic victory in the House of Representatives. Associated Press had not yet confirmed the result at the time of publication of this data. Regarding the Senate, Democrats have an advantage in several states with close margins, specifically in Texas, Michigan, Maine and North Carolina. In the event of a 50-50 split in seats, control will remain with the Republicans, as the deciding vote belongs to Vice President JD Vance.

Trump's approval rating, according to an analysis of polls by the New York Times, stands at around 37%, which is close to his minimum figure of 36% recorded two weeks ago.

President's position and Supreme Court precedent

On 3 November, before the polls closed, Trump gave a telephone interview to CBS News. "I have the highest power, it is called a veto," he noted. The president explained the mechanism of action: "Historically, you veto for a couple of months, and then they come and say: we need to make a deal."

He separately drew attention to the Supreme Court's decision in the case of Trump v. Slaughter. This year, the court, by a vote of 6 to 3, allowed the president to fire Federal Trade Commission member Rebecca Slaughter. According to Trump, this case "gives the president enormous powers that he has never had before." He readily accepted the nickname "Mr. Veto," which has become associated with him, CBS reports.

Financial markets' reaction

On the night of 4 November, the price of S&P 500 index futures fell by approximately 1%, while Nasdaq futures dropped by 2%. The US dollar index lost 0.55%. The yield on 10-year US Treasury bonds stands at around 4.95%. Bitcoin quotes are holding at a level of approximately $76,500.

Oil prices are holding near $95, influenced by two factors simultaneously. Reuters reports that the Strait of Hormuz is effectively blocked, while investors assess the prospects for negotiations on ending the wars in Ukraine and Iran. Pepperstone analyst Chris Weston believes that "a narrow blue wave could have been largely priced in."

Consequences for the legislative process

The formation of a divided Congress means that the adoption of every major law — from the budget to taxes and the defence budget — will now go through a process of bargaining. The market reacts negatively to uncertainty, as demonstrated by the first hours after the elections. A veto does not cancel Congress, but it sets a price for every potential deal, so it is worth assessing which decisions depend on Washington's ability to agree with itself.