Two years later, and the elections are still so tightly-contested that we again have to spend a week obsessing over slow vote counting in Arizona and Nevada and elsewhere, with lots of close races slowly clearing up to reveal the extent to which the Republican party will (presumably) control the House of Representatives in the next Congress, and then a month watching the political world descend on Georgia for yet another runoff election that will probably determine which party has the edge in the Senate (unless either party wins both Nevada and Arizona before then, in which case the stakes shrink a little).

If the stock market likes divided government, as has often seemed to be the case, then it should like this environment — regardless of the final word in these last remaining state counts and runoff elections, the government will almost certainly be split, and margins will be very narrow, with no easy majority to get anything done, and no clear mandate from voters to do anything specific. The environment is so partisan and ugly right now that I assume we’ll go through a bunch of “government shutdown” fears, and maybe a real shutdown, as the debt ceiling approaches and Congress resists passing continuing resolutions to fund the government. If we’re optimistic, the best hope for any legislative progress would be that Joe Biden might be empowered to try to be a dealmaker and push a more moderate agenda, with the possibility of a little bipartisanship on some extremely limited issues, but I won’t be holding my breath. The 2024 New Hampshire and South Carolina primaries are now on the clock, and nobody wants to take a chance that the other side will get credit for anything good that might happen… so the odds are good that nothing constructive will come out of Congress in the next 15 months or so.

The big issue is still inflation, and everyone will be arguing about that for some time, but the Fed is getting to the point that they’ve probably done almost as much as they can do to stop inflation… they’ll probably throw a few more rate hikes (and likely smaller ones) on the fire in the coming months, but it seems to very much be consensus that higher rates are (finally) having some impact, and inflation will generally drift down from here. It just takes ...