November 2022 may go down in the annals of history as the month when a lot of things changed both in US Economy and US Politics. Results of two key developments are keenly awaited by global investors – US CPI data for October got released today and the midterm elections are underway.

US Fed has already increased the Fed funds rate by 375 basis points and still, inflation looks untamed. Fed chief Powell had already hinted for the terminal fed funds rate to go as high as 5% till the task to bring inflation under 2% gets completed. US inflation currently is hovering around 8%. The impact of such unprecedented rate hikes will have a negative impact on the economy and stock valuations.

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Politics also plays a role in the way businesses operate and tax laws are made. In the ongoing United States midterm elections for 2022, Democrats and Republicans are battling for control of the House of Representatives and the Senate.

So, is it inflation or US Midterms that investors are looking at? “Financial markets are paying less attention to the U.S. midterms than to Thursday’s inflation data,” says Nigel Green, CEO, deVere Group, one of the world’s largest independent financial advisory, asset management and fintech organizations.

“Whoever wins or loses, we expect markets to rally, as they have almost always done in the past following the midterms. However, what most investors will be focusing on this week isn’t the midterms. It is the U.S. inflation data that is out Thursday. We expect that inflation will have cooled in October — but not enough for the Federal Reserve to step down from its agenda of interest rate hikes,” says Green.

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At last week’s crucial Fed meeting, investors were eagerly analyzing the tone of Chair Jerome Powell for guidance on the central bank’s future approach in the battle against inflation. The deVere CEO concludes: “Markets are more focused on Thursday’s inflation data, and how this will trigger the Fed, than on the midterms. The midterms will likely prompt a market rally, but it will be tempered by inflation data.”