Midterm elections could have a profound impact on trading this week. Usually, markets are jumpy going into an election cycle, especially with how contentious the elections have been as of late. Still, this cycle holds particular significance because of its implications on energy and inflation.

With the current administration doubling down on their restrictive energy policy, as the world is being throttled on power, any more announcements could cause the markets to move. It's possible we could see more aggressive rate moves coming post-election, and those will start to be indicated as soon as the votes are tallied. With the non-farm number coming in hot this week in the US markets, it's a sign that the actions to date aren't enough to curb the inflation beast.

If the republicans gain some ground in the house and senate, the markets could rally hard post counting. Usually, gridlock is positive for the markets as nothing really gets pushed through. No side's agenda can be followed. If the democrats maintain complete control, the markets may view this as a bearish event given the administration's posturing to date.

There is a lot of potential volatility with the US CPI release. It is anticipated to be around 8.0% year over year, and whether it's a beat or a miss will dictate a lot about future rate decisions. If it appears that inflation is coming back into the Fed's desired range, then that may be a positive for all markets. This could signal to the Fed that what they are doing is working, and they may start to back off the rate hikes or at least slow the pace. If the report comes in above estimate, that signals a huge issue to the Fed. That would mean even after all the hikes to date, they still do not have a grasp on the inflation problem. 

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