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Fresh off the exhausting financial regulatory reform debate, Wall Street is looking for a break after the midterm elections in the form of a friendlier Washington.
Expected Republican gains at the congressional elections are likely to tone down some of the anti-Wall Street rhetoric coming from Democrats since President Barack Obama took office last year.
Democrats used their majorities to push through reform but alienated banks in the process. Many on Wall Street are eager for a damping of Obama's zeal for regulation of business, like the healthcare reform and financial industry overhaul.
"There's a cliche on Wall Street that gridlock is the best of all possible worlds," said Michael Holland, money manager with Holland & Company in New York. "It would be a situation where we have some checks and balances."
A Republican rout could equate to a "come-to-Jesus moment" for the administration" that forces it to take a more centrist approach, said Gregory Valliere, chief political strategist at the Potomac Research Group.
With Republicans set to pick up seats in the Senate and perhaps even win control of the House of Representatives, investors are likely to get at least some of what they want. A GOP victory could provide a major boost to the chief item on Wall Street's agenda—extension of Bush-era tax cuts past their 2011 expiration date.
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