It also could set the stage for more measures to tackle the U.S. deficit, cutbacks in the Affordable Care Act and policies that weaken labour laws.
Midterm elections have historically been good for the stock market, no matter who gets elected. A recent study found markets usually record a low just before the vote and move upwards in the six months after the midterm.
Stocks already are higher today, partly on the euphoria of the Republican win. The Dow is up 61 points at 17, 445, the S&P 500 up seven points at 2019 and Canada’s TSX up 196 points at 14,587.
For Canada, the main hope is of both a U.S. Congress and a Senate in favour of pipelines to get oil to market.
The Keystone XL pipeline, which would take oil from Alberta’s oilsands to the Gulf Coast for refining, has been stalled for seven years awaiting U.S. approval. That could be good for TransCanada Corp., which yesterday said the cost of the pipeline keeps rising and now stands at $8 billion.
Republican Senator John Hoeven, a former governor of North Dakota, says he plans to introduce Keystone legislation in first quarter that would have Congress approve pipeline project.
Hoeven said he sees a “good chance” of working with the president toward Keystone approval, but is willing to attach approval to other “must-pass” energy legislation to get it through the White House.
But Keystone isn’t the only pipeline at stake – Encana and Enbridge and several U.S. companies also are working on U.S. pipeline projects that could help both Bakken shale oil and oilsands oil get to market.
Republicans haven’t been universally in favour of pipeline projects, with many supporting landowners who fought Keystone.
But the generally pro-business stance of the party is expected to play out in a good climate for energy production and transportation. The party would support efforts to move toward North American energy self-sufficiency, if only to break the Middle East’s stranglehold on U.S. energy prices.
Republicans also aren't as worried about climate change or the support of environmentalists as Obama.
The U.S. energy industry hopes for a reform of export laws in place for 30 years to allow unrefined crude to be exported outside of North America. That’s a stickier file and there is no guarantee the Republicans would support it.
Nor is it a slam-dunk that Republican support free trade and would remove barriers such as the Buy America policy and the COOL meat-labelling laws, to name two irritants to trade with Canada.
The opposition to Obamacare may play out in a lift of the tax on medical devices, which could help the healthcare sector.
Deadlock over budgets a risk
Tea Party Texas Senator Ted Cruz said this week that Republicans should “pursue every means possible to repeal Obamacare,” a move that could mean huge disruptions for health insurers in the program.
It is also possible that an emboldened Republican Party will attempt to force more budget cuts in attempt to slay the U.S. deficit.
If the 2011 tactic of blocking necessary government and spending in a battle over the debt ceiling is repeated, it could hurt equity markets and cut into U.S. growth.
"Republicans who want to make a run for control of the executive branch in 2016 will likely strike a tone of compromise," said analyst Brian Jacobsen, but there is a risk "those on the fringe will likely look to turn the showdown into a shutdown."Suggest a correction