Presidential Harassment by Congressional Dems Causing Stock Market Concerns, They Will Pass

Presidential Harassment by Congressional Dems Causing Stock Market Concerns, They Will Pass

Presidential Harassment by Congressional Dems Causing Stock Market Concerns, They Will Pass


No matter what you think of  President Trump, his reign as President has been great for stocks.

US President Donald Trump issued a Tweet on Monday blaming losses in the stock market on Democrats.

“The prospect of Presidential Harassment by the Dems is causing the Stock Market big headaches!” President Trump wrote.

President Trump, who never often takes full credit for increases in the stock market since when he entered the White House in Y 2017, has been somewhat less vocal about the DJIA this year as it has consolidate those huge gains in Y 2018.

But a week before the Congressional midterms, the president sent out another tweet warning what would happen if the Democrats won the elections.

“The Stock Market is up massively since the Election, but is now taking a little pause – people want to see what happens with the Midterms,” President Trump wrote on 30 October. “If you want your Stocks to go down, I strongly suggest voting Democrat. They like the Venezuela financial model, High Taxes & Open Borders!”

And a Tweet about the market last Tuesday, President Trump quoted Well Fargo’s Scott Wren: “If the Fed backs off and starts talking a little more Dovish, I think we are going to be right back to our 2,800 to 2,900 target range that we have had for the S&P 500.”

We have gone back and looked at every Congressional midterm election since World War II

We found that there is a very easy way to predict whether stocks will rise or fall after a Congressional midterm election, it has nothing to do with predicting in advance which party will win.

Since Y 1946, there have been 18 midterm elections, and US stocks have risen in the 12 months following every 1, that is 18 for 18.

In those 72 years we have had every possible political combination.

  • Republican President with Democratic Congress.
  • Democratic President with Republican Congress.
  • Republican President and Congress.
  • Democratic President and Congress.

And since 1946, stocks have risen an average of 17% in the year after a midterm.

When we measure from the yearly midterm lows, the results are better. From their lows, stocks rose an average of 32% over the next 12 months.

For perspective, that’s more than 2X the average performance for stocks in all years.

Now, we are entering the 3rd year of a Presidential term, which is historically the strongest year for stocks.

Have a look at the chart below and you see that the performance of stocks in the 3rd year of a Presidential term beats all other years by far.

And there is this

Leading up to midterms, US stocks typically perform poorly, from January thru October in Congressional midterm election years, they drop an average of roughly 1%. And in all other years stocks rise roughly 7% in that frame.

So, when we think of midterm elections they are a wet blanket for the stock market, traders and investors are not sure what the political situation will look like. And unable to see what is coming, they get nervous and cautious, and go to cash.

Once the election concludes and the wet blanket is removed, investors regain confidence and the market gets back on track and heads North.

So, we here at HeffX-LTN see Y 2018 is following this same scenario, just as it has for the past 18 cycles.

HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Neutral (-0.09) Neutral (0.13) Bearish (-0.25) Neutral (-0.14)

Keep America Great!

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