History rhymes remarkably well: Trump has lost both chambers. Is this a rebound or a reversal?

┈➤ Why did Trump lose?

History is rhyming. This isn’t Trump’s first midterm election, but in 2018 he only lost the House of Representatives and still held on to the Senate.

The only time in the past 30 years that both chambers changed hands was under George W. Bush in 2006. That may not be a coincidence: in 2003, George W. Bush went to war in Iraq.

Trump has been embroiled in a conflict with Iran for eight months, but the nuclear issue still hasn’t been resolved, the Strait hasn’t been reopened, and oil prices and inflation remain relatively high.

But in fact, Trump has had some achievements. For example, he captured Maduro at an extremely low cost. Although Venezuela hasn’t elected a new president yet, this has essentially brought the Chávez era to an end. The US government also signed an agreement with Venezuela, and oil companies should cooperate on oil production there going forward (Chevron is particularly keen).

Through DOGE and tariffs, he has brought in considerable additional revenue for the federal government.

There have also been large-scale interceptions of illegal immigrants, and the US violent crime rate has fallen considerably (reportedly to its lowest level in 125 years).

┈➤ Rebound or reversal?

First, I don’t think there will be an immediate reversal. As you can clearly see in Brother Bee’s chart in the previous article, after the midterm elections, unless the party holding the advantage in both chambers remains completely unchanged, major rallies have historically never started right away.

Fortunately, both chambers changed hands at the same time. If we go by historical precedent, the comparable year is 2006, not 2018. After the 2018 midterms, the market fell sharply again; in 2006, it mostly moved sideways with some volatility.

Second, although the makeup of the two chambers changed after the midterms, Trump is still president. The temporary budget approved earlier expires at the end of December, and we’ll have to wait and see what Trump’s subsequent budget proposal looks like.

There is little conflict between the two chambers right now, since both are dominated by Democrats. The main source of conflict is between the chambers and Trump, but that friction may be somewhat less intense. Perhaps this is one reason why market performance differed after the 2006 and 2018 midterms.

Third, do the two chambers have the power to stop Trump’s actions against Iran? If so, can they do it in the short term? And if they can, will that bring CPI down in the short term?

So Brother Bee’s personal view is this: there may still be a period of friction between the two chambers and Trump. If things move quickly, the market may improve in Q1 next year; if slowly, then in Q2.