Midterm elections can have major repercussions for the economy and markets. The Republican capture of the House of Representatives in 1994 led to a government shutdown — but then to an agreement on the first US balanced budgets in decades.

This is not one of those elections. Whatever the final results, what is clear is the American government will remain sharply divided, with only narrow margins of control by the winning party in each house and a large degree of gridlock.

Add to that a Biden administration strategy to front-load its policy agenda in anticipation of a difficult midterm and the final two years of this government will probably not be impacted much by the make-up of the House and Senate. Gridlock, and the stability it brings, may not be a bad thing for investors. But the Federal Reserve, not the government, will ultimately play a bigger role in determining the fate of the economy and markets.