US midterm elections will be in the limelight next week, and the Democrats are likely to lose control of Congress. While political disagreements may capture the headlines, it is the Fed outlook that matters more for the markets, economists at Nordea report.

Still mostly about the Fed

“While the results of the midterms will be watched closely next week, the Fed outlook remains a much bigger and more permanent driver for financial markets compared to US politics.”

“We see more upside potential for US yields, but the risk picture is not tilted towards higher yields any more in the same way as it was some time ago. In a state of high data dependency on the part of central banks, an environment of elevated volatility is set to continue.”