What Comes Nextįor the investors who spent the last few weeks watching the polls with gritted teeth, the time of uncertainty is mostly over. The predicted market turnaround will reach most companies, even if the gridlock means a decrease in government spending. However, positive market momentum tends to boost all sectors to varying degrees. Things may be complicated for the big tech companies who have received criticism from both sides of the aisle. Without the threat of heavy regulation, the financial services sector is likely to thrive. When no major changes are afoot, it is often easier for stocks to rally, as there is little to no uncertainty casting doubt over investment decisions. Why is gridlock good for the stock market? Primarily because a divided government can help preserve the status quo. “According to LPL Financial, since 1950, the S&P 500 has outperformed (on a 52-week basis) whenever voters produce the power scenario of a split or Republican-controlled Congress and a Democratic president.” Deutsche Bank strategist Jim Reid recently described midterm cycles as one of Wall Street’s best buy signals for equities. In fact, the 2022 midterms may have created the ideal political landscape for the new bull market that Lango describes. And as Lango highlights, the post-midterm rally tends to be especially strong when the election was preceded by stocks sliding.Īll this bodes very well for U.S. has held since World War II, stocks have risen throughout the following year with no selloffs. ![]() As he notes, in the twenty midterm elections that the U.S. InvestorPlace Senior Investment Analyst Luke Lango predicts that yesterday’s election will usher in a new bull market for which investors should be ready. But like clockwork, they rebound in the months that follow, often surging to impressive heights. Markets historically struggle in the weeks leading up to a midterm election cycle. What a Divided Government Means for InvestorsĪny financial historian knows two things when it comes to markets and midterms. Let’s take a closer look at why this is and what investors can expect as markets move forward from the 2022 midterms. And a divided government could be exactly what they need. In fact, history indicates that markets are destined for a strong turnaround in 2023. While Wall Street traditionally hates an uncertain economic landscape, it loves political gridlock. However, while today’s markets are currently clouded by uncertainty, they may bounce back in the coming year. ![]() Markets have reacted poorly to the day’s news, with all three major indexes falling. If Democrats maintain their hold on the Senate, it will mean a divided government for the next two years. While some races are still being settled, the Republican party is poised to retake the House of Representatives. The dust is still settling from the 2022 midterm elections.
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