The Week Ahead: The Midterms – Vote Early, Litigate Often

The Federal Reserve’s recent policy pause reflects a strategic need for more data rather than a dovish shift, as productivity gains continue to support the US economy. While the FOMC considers transitioning to six meetings annually to better align with data releases, market attention remains focused on the upcoming midterm elections. A likely Republican House flip and a narrow Senate margin suggest limited legislative capacity due to the filibuster, pointing toward potential policy paralysis. Fiscal priorities may shift toward restoring social spending, while foreign policy remains a point of contention regarding blockade strategies and energy prices. Ultimately, the prospect of reduced policy discretion following the midterms is expected to provide a positive tailwind for the US dollar, provided the administration moves away from controversial industrial policies that have previously pressured the currency.