Wells Fargo strategists suggest betting on the rise in long-term US assets and shorting the US dollar before the November 3 midterm elections. “The two most likely outcomes, the Democratic Party's sweep of both houses and the Democratic Party's control of the House of Representatives and the Republican Party's control of the Senate, will have a certain degree of negative fiscal impact,” strategists Erik Nelson, Angelo Manolatos, and Francis Brown wrote in a report on Friday. If the Democratic Party takes both houses of Congress at the same time, it could weaken AI-themed deals, thereby boosting US Treasury bonds and suppressing the US dollar. The strategist said that Trump's threat to escalate the war against Iran is bad for the long term and good for the US dollar because it could damage the region's energy infrastructure and drive up the risk premium in the energy market. According to the report, potential unforeseen scenarios include the Republican Party holding the Senate, which will form the strongest political constraint and “most likely result in fiscal consolidation,” thereby boosting bonds and dragging down the dollar. The strategist said that if the Republican Party's performance is stronger than expected to ease market concerns about AI boycotts, the above effects may be offset, and ultimately the impact may be neutral.

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