Displaying items by tag: midterms

(New York)

October is usually associated with market panics and gives investors a general sense of anxiety. Many of the greatest market meltdowns occurred in October, including 1929, 1987, and 2008. However, this October seems likely to be different, says Barron’s. In fact, good Octobers are not infrequent. It may surprise investors to learn that October has the highest average return of any month in the last 20 years. But the reason this year might be good is that there is a midterm election in November, a factor that has historically made October a strong month for returns.

FINSUM: When you put together the numerous factors supporting markets with the midterm elections next month, it seems like this October will be a good one.

(Washington)

Right now it does not seem like it has a high likelihood, but given the current direction of antipathy towards Trump, a sweep by Democrats in the midterm elections could happen. If it does (as opposed to the more likely option of Democrats only taking the House), the following sectors should do well, says Barron’s. These include: consumer staples, utilities, and real estate, all rate-sensitive sectors. The reason why is that Democrats are expected to push through a big infrastructure spending plan if they win, which would create deflation and keep rates pinned.

FINSUM: This is quite an insightful take on what might flourish if Democrats do have a breakthrough. It seems unlikely, but then again, it seemed unlikely Trump was going to win going into election night!

(Washington)

It would be an understatement to say that a lot is riding on the midterms. Control of Congress is at stake, and within it, the whole policy agenda of the country. The stakes are even higher because of how politically divided the country is. Many think the Democrats will take the house but lose the Senate, resulting in a split Congress. This puts many investors at ease because it could block some of the right’s more extreme impulses (such as those against free trade). However, there is reason to worry that Republicans might fare far worse. That reason is that Donald Trump is the most unpopular president ever in such a buoyant economy. According to one polling expert, “There’s a huge disconnect … The economy doesn’t seem to be dominating in a way that it often does in elections”.

FINSUM: Our worry for the Republicans is that Trump is making the midterms more about himself than the party, and given the high degree of disapproval, that approach could really end up costing Republicans in the midterms. Consider an all-blue Congress come November a considerable tail risk.

(Washington)

There has been a lot of speculation that the midterm elections could cause a big problem for markets. If the Democrats sweep into congress, causing a major power shift, many worry markets might crumple. However, the reality is that the most likely outcome—a blue House and Red Senate—would actually be bullish for stocks. One analyst who specializes in political-driven investing says that investors would be relieved to have a split Congress. If somehow both chambers go blue, then there would likely be a selloff in bonds, stocks, and the Dollar, but even that might prove a buying opportunity as Democrats “are not unified around anything”.

FINSUM: Depending on the election’s outcome, different sectors are going to see different results, as some are blue-positive (like auto suppliers, homebuilders, hospitals etc), while others are red-positive (like biotech, banking, credit cards, and defense).

(Washington)

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.