As Muni Bond Market Tanks, Suddenly Investors Are Freaking Out Over New GOP Congress

Eric Cantor

What’s hilarious is that up until Tuesday, November 2, you could hardly find anyone who was anything but ebullient about the prospect of a huge GOP victory.

Then the big victory came, and suddenly you’re hearing grumbling about what might happen if the next two years are characterised by gridlock and sharply tightened pursestrings in DC.

The big muni-bond mauling of last week is what’s set it off.

This was in the WSJ (!)

Some analysts say the rising influence of Republicans, who won control of the House in part with promises to cut spending, could potentially mean less federal money will flow through to states and localities, which would put additional pressure on already strapped governments.

That’s the most negative commentary we’ve seen regarding the economic ramifications of the GOP in the WSJ in ages (if ever).

On the morning after the election, we characterised things like this: The economy may now get better if taxes are held down, and some degree of regulatory consistency can be assumed. But the risk of a crisis, due to inflexibility in Washington (much less likelihood of support for states, cities, etc.) has also grown.

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