The midterm election results and the Wednesday ouster of Attorney General Jeff Sessions aren't likely to distract financial markets from what matters, but political noise of this sort might possibly have implications for long-term growth.

A more polarized U.S. society may well experience lower growth over the longer-term. In the near-term though, these issues do not affect markets' assessments of economic fundamentals.

The midterm election results mean that the “over-stimulation” of the U.S. economy is now less likely to continue and the U.S. tax cut sugar-high will fade as we go into 2019.

The Federal Reserve can therefore gradually move towards a “neutral” policy point. Today’s monetary policy position is still accommodative rather than “neutral."

No major changes are expected from the Federal Open Market Committee (FOMC) today. Fed funds’ rates rise in December remains on the cards.

Chinese Exports to the U.S.

The political noise that does have a bearing on markets is around U.S. tariffs or U.S. trade taxes.

Chinese exports to the United States were surprisingly strong in October as exporters rushed to send goods across before the U.S. consumer is subject to a further increase in tariffs that will take place on January 1. 

China’s exports to the U.S. rose 13.2 percent from a year earlier in October while China’s exports by volume also rose “an impressive” 9.9 percent.

For the first 10 months of the year, China’s surplus with the U.S., its largest export market, totaled $258.15 billion, widening sharply from $222.98 billion in the same period last year.

Nevertheless, it would seem that companies in the real world do not have much faith in some kind of a deal being done at the end of this month at the G20 dinner between Chinese President Xi and President Trump.

Earlier tariffs may well be being evaded however by supply chain manipulation. Direct exports of taxed Chinese goods to the United States have fallen by an un-feasonably large amount and this suggests that goods may be routed by other countries to be processed there before being sent on to the United States’ components in other products. In other words, taxing Chinese exports might actually be encouraging more outsourcing from the United States.

Brexit Deal Still Stuck at the Irish Border

The interminably tedious European Union (EU)-UK divorce proceedings now have senior ministers being invited into a private reading room in a building adjoining Prime Minister Theresa May’s offices to examine 95 percent of the withdrawal package that’s been agreed so far, according to people familiar with the matter.

What’s missing is the most contentious part of the deal — the guarantee to keep goods and trade flowing freely across the Irish border, which has rapidly become the only part of the withdrawal package deal that matters.

A deal will come at the last minute, and now is not the last minute yet.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.