After neck-and-neck election race, divided US government will be tonic for stock market

A DIVIDED American government will be a tonic for the stock market if the Republicans take control of the House of Representatives and keep the Senate deadlocked.

As of 7 pm on Wednesday (Singapore time), the Republicans were on their way towards winning control of the US House – but by smaller margins than forecast, with the Democrats gaining a Senate seat in Pennsylvania.

The Dow Jones Industrial Average added roughly 450 points on election day on Tuesday and is now about 10 per cent below all-time highs, as traders revel in the prospect of inaction from the federal government. Any hopes of tax, environmental or immigration reform will likely fall with the Democratic congress.