The stock market dipped Wednesday after Republican victories failed to meet expectations in the mid-term elections.

Wayne Winegarden, senior fellow in business and economics at the Pacific Research Institute, looks at the market response from a macroeconomics angle. The Federal Reserve had interest rates “so low for so long” that it created bubbles in the market, which are now working themselves out in the stock market and overall economy.

“The ‘red wave,’ quote-unquote, didn’t happen,” Winegarden said. “I think we have positive spins on that and negative spins on that.”

Long-term, this divided government in the wake of the election will not allow for the legislation or the spending control needed in the national economy, according to Winegarden. As of now, Winegarden believes that fiscal policy needs to be more supportive of growth, monetary policy needs to continue to tighten and regulatory policy needs to incentivize production.

“If we can get that type of policy mix, we can minimize the recession that I see coming and set ourselves up for strong growth towards the end of 2023 and going into 2024,” Winegarden said.

Regardless of whether there is a recession in the future, Winegarden said that families, particularly those of low income, are having a hard time given rising inflation creating affordability issues. Winegarden expects to see bad inflation reports for a couple of months at least.

“Household budgets are becoming weaker and people are worried about making house payments, they’re worried about their food bills, the cost of turkey this Thanksgiving,” Winegarden said. “I mean all of these factors are real, meaning the economy is difficult and there is real economic pain that’s out there.”

As for the 2024 election, Winegarden believes that these issues in the economy will continue to be on voters’ minds. He believes that there will not be policies created to make a change in the economy that could address the problems.

“We might be in a slow growth economy at that point as opposed to a declining economy, but these basic kitchen table issues are going to, I think, still be around in 2024,” Winegarden said.