Daily Commentary

MarketMinder’s View: First, this obviously dives into politics, given it is a discussion of the forthcoming midterms, chiefly the Senate races. So please note MarketMinder favors no politician nor any political party, assessing matters solely for their potential market impact. This highlights an increasing sense of alarm in the GOP over its chances of retaining either the House or the Senate in the 2026 midterms, as factors like high diesel prices, tariffs and the war put more historically red seats in question, a shift from the recent past. And it highlights how the Republican base seems unmotivated at present—and the party’s efforts to push this with ad spending, given money is a huge GOP advantage in this cycle. But all this is likely a little bit of overcomplication in many respects. For one, it is fair enough for the GOP to expect headwinds in retaining control of one or both chambers. The simple historical fact is the president’s party almost always loses seats at the midterms. In the House, it has lost them in 89% of midterms since 1914, shedding an average -30 seats, while the Senate has seen the president’s party lose seats 71% of the time, averaging -4 seats. (Data from the House and Senate archives, respectively. We start at 1914 because this is when the 17^th Amendment mandated direct election of Senators.) But it would be a little surprising if the House change were all that large this time. Few House seats are truly contested following all the gerrymandering of the past few years, with most impartial observers saying 20 – 25 are truly in question. In the Senate, 35 seats are up this year. Only six to seven are in doubt. Now, of them, polling and prediction markets put the Democrats ahead in most—so a swing in control from the GOP’s current 53 – 47 majority can’t be ruled out. That being said, for markets the main takeaway here will likely be the same whether the Dems take control or the GOP clings to an edge: The midterms are highly likely to increase political gridlock, forestalling legislation. That prevents new laws from picking winners and losers or injecting vast uncertainty, a key plus. It is why the nine months after the midterm elections are US stocks’ most consistently positive of the political calendar.

MarketMinder’s View: After nine days offline in which Brent crude oil hit highs of $131 per barrel, Saudi Arabia is reportedly set to restart flows this week through the East-West Pipeline to the Red Sea port of Yanbu, a key Strait of Hormuz workaround for up to 5 million barrels per day of crude exports. Oil prices, unsurprisingly, are now falling. We covered the shutdown of the pipeline following a drone attack last week, noting the outage seemed likely to prove short-lived and smaller than feared. That reality seems to be coming into focus now: “The kingdom is aiming to restore exports via the pipeline later this week, one of the people said. They asked not to be identified because the information isn’t public. Multiple oil traders said there were already signs of tankers arriving at the port of Yanbu, from where the piped supply is exported. … When the pipeline was shut down, the kingdom pivoted its exports back to the Persian Gulf, with millions of barrels seen loading at the giant Ras Tanura terminal in recent days.” The rest of the article covers continued threats to oil infrastructure from the Houthis and other Iran-backed groups in the region, which is fair enough to weigh. But the Saudis have every incentive to keep exports flowing and they have the technical means to mitigate disruptions. Keep that in mind as headline fears emerge.

MarketMinder’s View: “Consumers and businesses in the EU are spending three times more on Chinese imports than their counterparts in China are buying from the bloc, a study has shown. Customs data showed the gap between the EU’s imports from China and exports to China, the trade deficit, ran at more than €1bn (£860m) a day in July.” And politicians seem increasingly convinced they need to do something about it, like implement quotas on Chinese imports or slap tariffs on them, echoing the illogic that underpins US President Donald Trump’s tariffs from last year. The fact the EU runs a goods trade deficit with China shouldn’t shock, given the latter has a huge industrial base. The EU is a services powerhouse above all else and runs a trade surplus in services with China. Moreover, the idea that slapping on tariffs or cutting and capping imports of Chinese goods would help EU growth is a fallacy. Trade deficits tell you nothing—nothing—about which economy is superior or likely to grow more sustainably ahead. This is doubly true when you consider that almost nothing in this globalized world is fully built in one nation or region. Many of these Chinese imports are likely raw materials, components, tools or intermediate goods that go into production of final products. Capping or taxing them just increases costs for European businesses that may use them. How does that help growth? We reckon it doesn’t.