Federated Investors published the brief, "A quick take on the midterms: Gridlock." They ask, "What do you think the election outcome means for equities, the money markets and fixed income?" Deborah Cunningham, chief investment officer for global money markets, comments, "From an economic perspective, divided governance suggests mixed results. While the U.S. economy should continue to outperform the rest of the world, growth probably has peaked, although there is no recession in sight. We would anticipate inflation to continue to trend modestly higher on tariffs and trade disputes, with disagreements on these issues more likely in a divided Congress. We also expect wage inflation to keep trending higher as the worker skills that are available aren't necessarily meeting the requirements of many of the new jobs that are available. From a money markets perspective, we expect to see modestly higher short-term interest rates, probably in the 3+% neighborhood, with good growth and opportunity in liquidity products in a slightly increasing market." Robert Ostrowski, chief investment officer for global fixed income, adds, "Last night was as expected: no macro surprise and no real new information. The margins on the House and Senate races give something for each side to spin as victory. Maybe the pollsters were the real winners. Prepare for gridlock, which is generally constructive for the fixed-income markets as it reduces the tail risk to either end of the pre-election forecast (a "Blue Wave'' capturing all of Congress or a "Red Fort'' with Republicans holding off the Dems' charge.) ... Looking further, it will be interesting to see if President Trump and the House Democrats can work together on infrastructure and trade initiatives."

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