The 2022 midterm elections are today and voters across the US will decide the makeup of Congress. That will determine who will hold key offices in their states and cities and weigh in on policies directly via ballot measures.

Democrats currently have narrow majorities in both chambers, the House and the Senate and because the same party holds the White House, conditions are ideal for them to pass bills President Joe Biden will sign. Every 2 years, voters decide who has the majority in both chambers of Congress. This year that means the candidates voters choose to a large degree, whether President Joe Biden can get any new policies passed going forward or if Republicans will gain the ability to block most things he wants to do.

All 435 seats in the House of Representatives are on the ballot, as well as 35 of the 100 Senate seats.

Forecasts suggest Democrats are likely to lose control of the House and keep the Senate, but we all have learned that polls and forecasts are as reliable as a politicians promise. If Democrats were to lose both chambers, they would be forced to rely on Biden to veto bills they disagree with.

Beyond Washington, governors, secretaries of state, and attorneys general, along with members of the legislature, are up for election in dozens of states. The winners of those contests will affect state policies on issues like abortion and voting rights.

What does it mean for the financial markets? It’s an expensive, entertaining spectacle dominating TV and the Internet today and some will make you believe that tomorrows sunrise will depend on these results. Most likely, the CPI report that will be released on Thursday will be a much bigger deal, especially for the markets. Inflation has peaked and while it won’t disappear any time soon, we will see a slow down probably starting in a few weeks. Democrats and Republicans will be quick to take credit for that, no matter what the outcome of this election is. While both have heavily contributed to the current record rates, neither one of them need to be thanked for slowing inflation. Historically markets always do better in the second half of a presidency, with the 3rd year being the best. This is when the governing party remembers that they would like to be re-elected and implement better policies. But the best thing for markets has always been government not doing anything. If the Republicans do well today, markets will see that as a positive because it will create a Gridlock. Gridlock is the political stalemate that occurs when the government is unable to act or pass laws because opposite parties control the White House and Congress. Seems like that the largest enterprise in the world, the US Government, is most valuable for the Financial Markets if they do absolutely nothing. No doubt that this election is very important for many in regard to abortion and voting rights. Markets will have short term reactions and short and mid-term investors will be hoping for a Gridlock. For long term investors, the result is meaningless as pretty much any other election is as well.