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Divided US Congress - More Troubling

The results of the US midterm elections have given a divided congress with Democrats controlling the Senate and Republicans controlling the House. This is positive in a way where the worst outcome feared is avoided, that was Republicans controlling both with a Democratic president. But it is negative in a way that policies such as the Inflation reduction act might be reversed or policies that need to be passed in the remaining term will face hurdles.

The next 12 months are crucial for the global and USA economy. The leading indicator is Flash Manufacturing PMI is already contracting and is below estimates. This occurring before the actual festival demand starts is not a positive sign.

In addition to this, there are already large tech companies announcing large-scale layoff that has already surpassed 2001 crisis numbers. Though the comparison is not like to like but the sentiment and being the industry that dominates consumer demand it is not a good trend.

Thus, in such economic situations, it is an utmost requirement that the political mechanism is smooth so that any decision that is needed to reduce the negative impact can be taken in time.

Going by most estimates global economy is heading for a recession that may or may not be severe but if there is an economic or financial stability risk that needs a political decision to address then there might be a delayed response.


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