Last week’s midterm elections ended total Republican control in Washington , as the Democrats regained control of the House of Representatives. With some significant help from a skewed Senate map, in which Democrats and their allies had to defend 26 seats against the Republicans’ nine, Republicans held onto (and almost certainly increased) their majority in the Senate, pending the results of elections in Florida and Mississippi. This gave President Trump enough reason to claim victory in this election as he fended off a complete ‘Blue Wave .’
Now that the US mid-term elections are behind us, it is a good time to reflect on the potential implications for an asset class that might not spring to mind: emerging markets equity. To appreciate the effect of the US elections on emerging markets, it is necessary to take a step back and review the issues affecting the asset class. On the back of surging earnings and global synchronized economic growth, emerging markets soared in 2017, with the MSCI Emerging Markets Index (USD) up 37% in a market driven by growth and momentum.