MARKET PERSPECTIVE
By J Mulraj
Sep 19-25, 2026
Or will the voters clip his power?
Image created by ChatGPT
Currently the Republican Party, led by Donald Trump, has the advantage of a trifecta. That means it holds the Presidency, plus a majority in both the US House of Representatives, or Congress, and in the US Senate.
The trifecta enables the Republicans to more easily pass laws, confirm judicial appointments, and to further its political agenda (eg tariffs policy) with less gridlock.
In the former, of the total strength of 435 seats, the Republicans hold 218, the Democrats hold 214 and there are 2 vacancies. One Independent representative is allied with Republicans, so it’s tally becomes 219. All 435 come up for elections on November 3, when voting in the mid term polls commences.
The Senate comprises 100 seats, split between Republicans (53), Democrats (45) and 2 Independents who align with Dems, taking their count to 47. Of these, 35 seats are up for re-election.
So, in the mid terms, the Dems need an additional 4 seats in Congress and an additional 6 seats in the Senate. Either one, or both, appear likely.
As per polymarket, a decentralised prediction market, Trump’s approval rating is between 32-38% overall. It is higher amongst Republicans, at 73%, down from 82. Polymarket predicts that the Democrats have a 94% chance of winning the House of Representatives and a 66% chance of gaining the Senate.
There are a few rabbits Trump can try to pull out of his hat before Nov 3. One is an end to the Iran conflict, either militarily or diplomatically, and a opening of the Strait of Hormuz to global trade. The other, with better prospects, is a trade deal with Canada, ending a tariff war foolishly initiated by Trump.
In the Iran war, Trump recently threatened to annihilate Iran. This got the Iranian President, Pezeshkian’s goat. At the recent UN General Assembly in New York, Pezeshkian went hard line, in response to the threat, and stated that Iran would not give up its quest for a nuclear programme, would not provide free access to the Strait of Hormuz when so threatened, and would now only negotiate with USA on its terms (https://edition.cnn.com/2026/
Iran’s President is, ironically, stranded in NY after the UNGA, because US sanctions have prevented airlines flying to Iran. Iran has threatened regional airports for accepting the US sanctions on flights.
Could Trump turn to China, the largest buyer of Iranian crude, for help? Trump and Xi are currently meeting in America. Xi has, encouragingly and with statesmanlike aplomb, stated that US and China must coexist in peaceful harmony. But China’s help with Iran, should it be given, would come with a quid pro quo. That may well be Taiwan. In this, Elon Musk’s Terafab may well be the key. It is a massive ($ 119 b.) joint manufacturing venture between Tesla, SpaceX, XAi and Intel to build the world’s largest chip factory. That would remove dependence on Taiwan’s TSMC for chips for all of Musk’s companies, and other US manufacturers.
So a deal with China may be one rabbit that Trump could pull out of his hat, if it helps resolve the Iran imbroglio.
Another boost to Trump’s prospects in the mid terms would be a trade deal with Canada. Trump launched a tariff war on it’s Northern neighbour, with whom it shares the world’s longest border, and trade reached a whopping $ 800 b. prior to the tariff war. Canada did not roll over and accept, but imposed counter tariffs, and engaged with other countries to reduce US dependence. In order to renegotiate a trade deal with its miffed neighbour, Trump would need to change his dietary preferences, from unhealthy pizza and Big Macs to the humble pie! If he succeeds in getting a trade deal through, in which both nations benefit, his electoral prospects would improve in the mid terms.
But without the rabbits, it looks as if the Republican Party would lose its majority in one or both chambers.
That would serve to tame his impulsiveness and recklessness, which may not be such a bad thing. However, the current front runners for leadership of the Democrats do not show the grit and backbone needed to confront powerful adverseries like Xi, Putin, the IRGC and others. Current forerunners include Kamala Harris, former VP and Democratic nominee, Gavin Newsome, Governor of California, Pete Buttigieg, former Transportation Secretary, and others.
Last week the BSE Sensex ended at 73895 for a weekly loss of 886 points.
The wasteful spending on conflicts, financed by debt (it’s stupid to raise taxes to fund war, isn’t it? with elections looming) has resulted in US bond yields breaching 5% for the 10 year bond (5.13%, the highest since 2017), and 30 year bond (5.4%, highest since 2004).
Governments need to curb spending, but don’t, kicking the poor can down the road. The can has long since surrendered, but the abuse does not stop. Hopefully, the higher borrowing costs, combined with competition for funds from the hyperscalers in the AI race, will help rein in expenditure, especially for conflict.
One hopes that Trump and Xi come to an agreement on guardrails for AI.
Stockmarkets are at their highs despite several wars, despite disruption caused to 20% of oil trade resulting in $ 100/ barrel crude oil, despite high bond yields which will compel raising of interest rates. The high bond yields also make them more attractive as a risk free investment, to risky equity at high P/E ratios. Caution is called for.
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Comments can be emailed to: jmulraj@asiaconverge.com
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