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Democrats' Big Midterm Gains Threaten Wall Street's Split-government Hopes

Democrats held onto control of the Senate, extinguishing GOP hopes of a 'red wave'

A stronger-than-expected showing by Democrats in the U.S. midterm elections may force investors to rethink the split government scenario many had expected.

Democrats held onto control of the U.S. Senate, extinguishing hopes of the "red wave" that Republicans had expected leading into the midterm elections. Republicans remain close to seizing control of the House of Representatives as officials continued counting ballots, with results expected to become apparent over the next several days.

Following last week's midterm vote, investors had largely expected a split government, with Republicans gaining control of the House, Senate or both while Democrat Joe Biden remained in the White House. While a Democratic sweep is still seen as unlikely at this point, perceptions that such a result is within the realm of possibility could ignite worries over spending and legislation that many investors had put to rest.

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