Daily Commentary

MarketMinder’s View: (Once again, MarketMinder is politically agnostic, never preferring one party or politician over others as political bias blinds and leads to investing mistakes. We seek only to assess elections’ likely market consequences or lack thereof.) In a non-shocking special election runoff for Marjorie Taylor Greene’s vacated US House seat in Georgia’s 14th congressional district, Republican Clay Fuller prevailed over Democrat Shawn Harris. This gives the GOP slightly more wriggle room in the chamber, with its narrow lead ticking up to 4 seats (218 – 214 – 1, after former GOP Rep. Kevin Kiley (CA) went Independent weeks ago). That isn’t likely to greatly sway legislation, which generally faces an uphill battle anyway during election years, as representatives prefer not to rob themselves of wedge issues for fundraising and campaigning by actually getting things done. While the outcome wasn’t much in doubt, coverage focused on Fuller’s margin of victory versus Greene’s. “Two years ago, Greene defeated [Harris] by a nearly 30-point margin. With 86% of [Tuesday’s] ballots counted, Harris had 42.5% of the vote and was trailing Fuller by about 15 points.” Given the relative swing, some pollsters extrapolate this to November midterm elections (when Fuller’s newly won seat will be up for grabs again), in which the president’s party usually loses ground. To the degree results here are indicative, they show Republicans unlikely to buck the trend, though there are obviously some wildcards affecting voters’ sentiment at the moment. Overall though, nothing here cuts against the likelihood that midterms will deliver more gridlock, teeing up stocks’ historically strong stretch that starts late in midterm years.

MarketMinder’s View: (As always, MarketMinder is nonpartisan, favoring no party nor any politician and focusing solely on political developments’ potential market implications, if any.) Don’t count your chickens before they hatch, but Canada’s minority ruling party is clucking over a potential majority after Conservative Member of Parliament (MP) Marilyn Gladu crossed the floor to join Prime Minister Mark Carney’s Liberals, leaving them one MP short of “broader powers to pass legislation and reshape Canada in the face of a changing global order.” A majority may come soon enough: “Liberal Party candidates are favored to win two special elections next Monday in Ontario, and are neck-and-neck in a third race in Quebec.” As we wrote last month, though, that doesn’t automatically mean Ottawan gridlock is over. While traditional interparty gridlock may be less relevant, intraparty divisions likely gain prominence, especially if newly minted Liberals aren’t completely on board with the party’s left flank. Meanwhile, a thin Liberal majority—and its consequences—have been on markets’ radar now for months. This would be no shock for stocks, which move most on surprise.

MarketMinder’s View: As we wrote last April, one reason we expected tariffs’ actual bite to not match their bark: Importers would be incentivized to discover loopholes, especially with regulatory enforcement (and staffing) lacking. One year later: “Experts say companies most likely began finding ways to reduce the value of the goods they were sending to the United States. Lowering the value of the toys, couches and other products headed for America’s shores meant that companies could also reduce the amount of tariffs they had to pay for those imports.” Read on for more details on the many ways (legal and otherwise, which we absolutely don’t endorse) firms have explored tax avoidance. But for investors the takeaway remains the same as immediately post-Liberation Day: Tariffs’ hit is less than feared, which is why stocks rallied even as extra import taxes bit.