Alongside incoming economic data and earnings, there are a few political developments Wall Street is watching as midterm election vote-counting continues and President Biden meets with Chinese President Xi Jinping.
Here are three things to watch in politics this week:
Biden and Xi Jinping move to ease U.S.-China tensions
President Biden said Monday that he is looking to avoid a Cold War with China after meeting with Chinese Leader Xi Jinping at the Group of 20 summit in Indonesia. The meeting marked the first time the two leaders met in person since Biden became president.
“I absolutely believe there need not be a new Cold War," Biden said at a press conference in Bali after the meeting. “We’re going to compete vigorously, but we are not looking for conflict. I’m looking to manage this competition responsibly.”
Biden told reporters that the U.S. position of strategic ambiguity regarding Taiwan has not changed and that he does not expect an imminent invasion of the democratic island by China, the Associated Press reported.
Biden, who has been politically emboldened after his party beat expectations in the midterm elections, also elevated human rights concerns with Xi, particularly surrounding the treatment of Uyghur Muslims in the Xinjiang province of China.
Xi, meanwhile, faces global scrutiny for continued COVID-19 lockdowns and a budding geopolitical relationship with Russia and Iran. Both Biden and Xi agreed that Russian President Vladimir Putin should not deploy nuclear weapons in Ukraine, according to the White House.
Democrats retain Senate control
Democrats will hold the Senate after Sens. Catherine Cortez Masto (D-NV) and Mark Kelly (D-AZ) won re-election in Nevada and Arizona.
It's unknown what will happen in the Georgia runoff race on Dec. 6 between Democratic Sen. Raphael Warnock and Republican Herschel Walker. Regardless, Democrats will keep the upper chamber thanks to a tie-breaking vote from Vice President Kamala Harris.
It's likely Republicans will have a narrow majority in the House, though the final races are still being counted. That small majority is much smaller than Republicans had wanted to get in the midterms, and it has weakened House Minority Leader Kevin McCarthy, who predicted a massive GOP win in the House. It's unclear whether he will secure the 218 votes he'll need among his caucus to get the speakership.
Independents determine midterm elections
The strategy that propelled Trump to the White House in 2016 did not pan out in 2022.
Trump's MAGA forces thought that stirring up the base would lead to a red wave. Instead, it turned off independents, who are deeply agitated about the direction of the country and even more perturbed by a return to Trumpism.
According to a survey of midterm voters conducted by the Associated Press, Republicans had a six-point advantage among voters, outnumbering Democrats 49% to 43%. In Pennsylvania alone, Republicans showed up by a more than 5 percentage point margin while the GOP had an 11-point margin in Arizona, the Wall Street Journal noted. But among independents, voters broke to the left.
CNN's exit polls reported that 49% of voters who identified as Independent broke for Democrats while 47% went for Republicans. That's a flip from the last four midterm elections, where independents tended to vote for the GOP over Dems.
"A clear victory for team normal," Liz Cheney said at an antisemitism conference last week.
With a potential Trump presidential announcement looming, the 2022 midterm results suggest that the path to the White House in 2024 will depend on either party's ability to mobilize the middle — rather than their respective bases.
Kevin Cirilli is a visiting media fellow at the Atlantic Council's Global China Hub and the Krach Institute for Tech Diplomacy at Purdue. Follow him on LinkedIn.
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