The pool of Democrats keeps moving left. In what comes as a no surprise (but was not a sure thing), Bernie Sanders has just announced his candidacy for the 2020 election. His platform is going to be built around three pillars: free education, Medicare for all, and a $15 minimum wage. Sanders narrowly missed the Democratic nomination in 2016 and has a particularly strong following among the young.
FINSUM: Politics could not be more polarizing right now, so in many ways it makes sense that the Democratic candidates are quite far left. The difference between now and 2016 is that those leftist narratives have more popular traction than the more centrist position Hillary Clinton adopted then.
The midterm elections are just around the corner and there is some anxiety over how they might impact stocks. The last few days have been poor, while the preceding month had been good. Barron’s argues that the election will be bullish for stocks. The reason why is that no matter what happens, stocks look likely to rise. Even when the sitting president’s party loses seats, stock tend to gain, and the year after such a loss tends to be the best year of a president’s term. One of the reasons why is that the party in power typically undertakes economic stimulus after their defeat. The Wall Street Journal summarizes “Either way, many believe that stocks will get a boost after the midterm elections as investors will be contending with one less uncertainty”.
FINSUM: We think the election will be good for stocks as well. If the democrats see success, there is less risk of a brutal trade war. If the Republicans win, there is probably more pro-business policies put in place.
Recent polls have shown strong gains for Democrats, raising the prospect that the party will take back the House and maybe even the Senate. So what would that mean for stocks? Well, the historical picture is mixed. Generally speaking, stocks have a rough September heading into the November midterms. However, immediately before and after the election, they are relatively unaffected, no matter the outcome. Generally speaking, from the beginning of October until the end of the year (in a midterm year), stocks rally strongly.
FINSUM: The basic picture here is that we could be in for a rocky month, but that stocks may do well as we approach and move past the midterms and investors get used to the ‘new normal’, whatever that may be.
As the midterm elections are starting to heat up with various primaries, it is time to revisit how the elections will impact markets. Because Republican victories in the House and Senate would simply be a continuation of the status quo, the big question seems to be what happens if Democrats win one or both. The answer is that there will likely be little impact, but if there is, it could be positive, according to Barron’s. This is because having Democrats control the house (perhaps a likely outcome) would be seen as keeping the White House’s potential overreach on trade and the economy in check.
FINSUM: Historically speaking, the midterms have resulted in strong rallies for stocks. Why wouldn’t it be the same this year? We expect either little effect or a positive one.
Yesterday was a rough one for the President. Michael Cohen’s guilty plea, and testimony that he was order to pay two women by Trump using campaign finances caused yet another firestorm for the White House. Trump responded strongly, admitting that he knew of the payments, but denying that they came out of campaign finances, saying he paid for them personally. Lawyers say it will be hard to use Cohen’s testimony to bring charges against Trump. However, Cohen’s lawyer says that his client can also testify that Trump was aware of Russian efforts to interfere with the election before such information was ever reported publicly.
FINSUM: We do not think the campaign finance situation will imperil Trump, but that last statement about Russia is a real x factor which could cause serious trouble.