Here’s why you need to watch for the control of the House now

And the policy push that matters most for Trump is arguably that of tax cuts. The House is in charge of approving tax legislation and a Democratic majority there surely won’t make matters easy for Trump. He would have to go through unconventional means i.e. executive powers in order to try and push through. But I would say that is rather unlikely as he would also have to adjust tax regulations and laws to do so.

So, absent of tax cuts. What else can we expect from Trump’s presidency if Democrats hold control of the House?

In terms of tariffs, it wouldn’t matter. That is because it falls under the jurisdiction of the president and foreign trade policy. Sure, the House could have some indirect influence in trying to limit that impact. But to put things short, Trump will have much more leeway here as compared to tax cuts and it will almost certainly be done.

Putting the above together, it means no tax cuts and more tariffs with arguably higher inflation and higher yields. It doesn’t really sound like a good recipe for risk assets now, does it?

This article was written by Justin Low at www.forexlive.com.