The clear election result sets the stage for a sharper conflict in American politics, with congressional investigations, tough hearings and the sudden risk of President Donald Trump being impeached by Congress.
Unfortunately, we can expect quite contentious times in Washington for two years (between Congress and the White House), says Johan Karlberg.
“Referendum” on Trump
He explains the Democrats’ election victory as though they had won “a referendum” on Trump’s policies. But it is difficult to see what the election result will actually mean politically:
The midterm elections are very much “bottom up”: electoral district by electoral district, and focused on local issues. So we don’t really know what this means yet.
There is no clear Democratic line here calling for reform of government finances, health care or the labor market.
However, it is clear that for two years the Trump administration has taken a clearly negative stance on the green transition and energy efficiency, alongside waging a tariff war with the outside world and a war with Iran. These are areas in which Swedish companies are investing heavily, and those sectors will certainly do better now, Karlberg believes.
However, he does not believe that large Swedish listed companies with significant exposure to the US - such as Ericsson, SSAB, Gränges and Munters - will be affected as much.
They have local supply chains to a very large extent. So they are not affected that much by trade policy. Many of them already have 25–35 percent of their turnover in the US, built up with local subcontractors and a local supply chain, he says.
Strong US economy at the bottom
He also points out that the Supreme Court has made it clear in several decisions during Trump’s term that the US president has the mandate to conduct the country’s foreign and trade policy.
Even though turbulent political times are expected, the stable message for Swedish companies is that the US may be worth investing in, according to Karlberg.
It is a continued strong economy at the bottom.
The forecast is for GDP growth of 2.5 percent in 2027, with low core inflation and low unemployment.
The underlying US economy looks very strong, and there is no reason to believe that it will change drastically.
What do you think?