Midterms Are Over, Now What?

If you’re like us, the best thing about the midterm elections being over is the expectation that the political television ads and spam phone calls will cease to exist… at least until the 2020 Presidential election kicks off in 12 months.

This midterm season went largely as expected; the Democrats took the House of Representatives while the Republicans held the Senate. What should investors expect from the US midterm election outcome? In the way of policy, not much. Most political pundits think Congressional gridlock will amount to little substantive change in policy. But the new political landscape may bode well for the financial markets.

If the volatility in October told us anything, it was that the market does not like uncertainty. In fact, the day after the midterms, the markets rallied given the certain nature of the elections. This gridlock brings with it a level of certainty that corporate CEO’s like–can make business plans around–and markets expect.

And with the US economy doing well, the election results may mean the best possible outcome for financial markets. Historically, gridlock has been good for stocks. Since 1950, the S&P 500 Index has delivered positive returns  in the 12 months following midterm elections, the average of these equating to almost 16%. 2019 could always prove to be the exception to this trend, however historical data shows us that though our potential political stalemate may be frustrating from a policy standpoint, investors have room for optimism.

Important Note: This material is for informational purposes only and is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy or investment product. Actual economic or market events may turn out differently than as presented. © 2018 Madison Wealth Management