Post-Midterm Stock Market Reaction: Stocks Jump 1.58% to 7,688.62 as Yields Ease and the Fed Holds Hawkish

Tuesday's session delivered the cleanest risk-on close of the cycle, and the mechanism was not stimulus and not a dovish pivot, but the removal of a political unknown. Democrats swept both chambers of Congress in the Nov 3 midterms, and the S&P 500 jumped 1.58% to close at 7,688.62, per Reuters, while long-term Treasury yields fell at the same time. That combination, stocks up and bonds up in the same session, is the signature of a growth-neutral "uncertainty removed" repricing rather than an inflation shock, and it leaves the next two scheduled prints, October payrolls on Nov 6 and October CPI on Nov 10, doing the work of deciding whether December brings a Federal Reserve hike.

Key Takeaways…