Democrats’ landslide victory... Could become a major negative shock, a “Black Swan” [U.S. Midterm Elections]

[Financial News] Wall Street is on alert after the Democrats’ landslide victory in the U.S. midterm elections. Warnings have emerged that it could become an unexpected major negative shock—a “Black Swan”—for the New York stock market. The concern is that political clashes could intensify as the Democrats expand congressional investigations and oversight and put the brakes on President Donald Trump’s policy agenda.
According to CNBC on the 4th, Philip Blancato, chief market strategist at financial services firm Osaic, predicted that if the Democrats secured a supermajority in Congress, it could deal the stock market a “very big blow.”

Blancato said, “The scenario would be for stocks to fall in November amid concerns about how far the Democrats will go to obstruct the current administration.”
He warned, “If that happens, it could lead to impeachment and broad investigations, among other things,” adding, “This is tomorrow’s Black Swan for the market.” A Black Swan is an event that is difficult to predict but, if it occurs, can deliver a massive shock to the market.
The Democrats retook the House and Senate, which had been controlled by the Republicans, in the midterm elections held on the 3rd. They secured 54 seats in the Senate, a net gain of at least seven seats. However, controlling both chambers and securing a supermajority are separate matters.
In the U.S. Congress, the threshold for a supermajority varies depending on the measure being voted on. In the Senate, ending a filibuster—a procedural tactic that legally delays proceedings—on an ordinary bill and proceeding to a vote generally requires 60 of the chamber’s 100 seats.
Overriding a presidential veto or proposing a constitutional amendment in Congress requires the support of two-thirds of the members present in each chamber. If all members are present, that would mean 290 votes in the House and 67 in the Senate.
The House can impeach President Trump, but removing him from office is expected to be difficult. A simple majority of 218 votes in the House can approve articles of impeachment. But convicting him in the Senate and removing the president from office requires the support of two-thirds of the members present.

Assuming all 100 senators are present, 67 votes would be needed. The Republicans have already secured 39 seats, according to Decision Desk HQ (DDHQ), exceeding the 34-seat threshold needed to block conviction in an impeachment trial. If Republican senators remain united, impeachment could prove difficult to carry through to Trump’s actual removal, even if the Democrats pursue it.
For the same reason, it would also be difficult to override President Trump’s vetoes. If 34 or more Republican senators oppose a measure, the votes needed to override a veto—67, assuming all senators are present—cannot be secured.
By contrast, the threshold for launching congressional investigations and hearings is relatively low. If the Democrats become the majority party in both chambers, they can gain control of standing committees and expand investigations and oversight of Trump administration policies and matters involving businesses.
Democratic House leaders have already signaled they may investigate the business dealings of people close to the Trump administration, as well as how immigration enforcement agencies exercise their powers.
Additional tax cuts and increased government spending pursued by the Republicans could also be constrained by the Democrats’ control of Congress. Meanwhile, bills advanced by the Democrats could be blocked by President Trump’s veto, potentially prolonging the policy deadlock.
The risk concerning markets, then, is less Trump’s actual removal from office than a prolonged political clash resulting from expanded Democratic investigations in Congress and the administration’s response.
Blancato’s warning is also understood to focus on a scenario in which policy uncertainty and political tensions intensify as the Democrats expand their influence in Congress well beyond a simple majority.
 
[email protected] Lee Seok-woo, International Affairs Specialist Reporter