The midterm elections are now largely behind us, save for a few close races that have yet to be decided. The outcome was what had been predicted by most experts: Democrats took back control of the House of Representatives, while Republicans kept control of the Senate. Democrats added approximately 40 house seats, depending on several races that are still counting votes. It appears that Republicans actually gained in the Senate, likely picking up two net seats (which will be confirmed by Mississippi’s runoff Senate election in December).
The results of the election create a split governing dynamic in Washington DC: A Republican White House and Senate, along with a Democratic House of Representatives. Surprisingly, a split government under a Republican President has historically been the best for the U.S. stock market. According to Investor’s Business Daily, since 1958 a divided Congress has yielded the best results for the U.S. stock market, as measured by the S&P 500. Markets don’t mind the “gridlock” of a split government it seems, and in fact may welcome it because of the inability of either party to pass sweeping legislation. You can find that article here: https://www.investors.com/news/split-congress-elections-stock-market/
While the anecdotes around U.S. elections are interesting and sometimes insightful, the broad economic picture is much more important to financial markets. The future health of economic growth, and company profits, will be the long-term driver of higher, or lower, U.S. stocks.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
Stock investing involves risk including loss of principal.