Investors Focused on Outcome of Congressional Midterm Elections

Investors Focused on Outcome of Congressional Midterm Elections

Investors Focused on Outcome of Congressional Midterm Elections

$SPY, $DIA

The US Congressional midterm elections will have implications for Wall Street, regardless of how they shape the balance of power in Congress.

That is because in every scenario there could be winners and losers in Key sectors of the market, including banking, pharmaceuticals, companies that would benefit from government infrastructure projects and those that rely on healthy consumer spending, analysts say.

Divided government equals gridlock, gridlock is a good thing for markets because markets like certainty.

The odds of the Democrats taking both houses of Congress have diminished of late, to the relief of Wall Street.

Should Republicans remain in control of Congress, it is likely The Trump Administration will make the personal tax cuts included in last year’s reform package permanent.

Also, on the to-do list: reforming entitlements, more easing of government regulations on banks and other businesses and perhaps tackling the issue of drug price controls.

If the GOP extends its majority, there also could be a push to lower capital gains taxes and enact an infrastructure spending bill.

The midterms add to the uncertainty that has buffeted the market for the past month.

After a solid Q-3 that saw records for the S&P 500 and DJIA, stocks have saw October volatility on fears that rising interest rates and the US trade dispute with China could undo some of the benefits of the GOP tax cuts and eventually squeeze corporate profit margins. October snapped a 6-month winning streak for the S&P 500, giving the benchmark index its worst monthly loss in 7 years.

But, regardless of how the midterm elections turn out, history suggests stocks will be fine.

The S&P 500 has generated an average price return of 16.7% in the 12 months after each of the midterm elections going back to Y 1946, according to the data. That’s 18 elections, many of which shuffled the balance of power in Congress.

Notably, under every political makeup in Washington, stocks have gone up and the economy has grown.

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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