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HomeEconomyWhat stock market professionals are saying about the midterm elections: Morning Brief

What stock market professionals are saying about the midterm elections: Morning Brief


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This article first appeared in the Morning Brief. Get your morning feed sent straight to your inbox every Monday through Friday by 6:30 a.m. ET. Subscription

Tuesday 8 November 2022

Today’s newsletter by Sam Roeauthor TKer.co. Follow him on Twitter at Tweet embed. Read this and more market news on the go Yahoo Finance Application.

Millions of Americans will go to the polls today to vote for their national, state and local representatives.

The stakes are high and could end with Republicans taking control of the Senate and/or the House, raising the likelihood that simple new legislation will pass amid the deadlock.

Ironically, inertia is often thought of as bullish for stocks because it removes some of the policy uncertainty.

“If Republicans do well and regain control of one or both houses of Congress, we see the event as positive for the stock market through the end of the year,” Laurie Calvasina, head of US equity strategy at RBC Capital Markets, wrote Monday. . ‘We think October move [in the S&P 500] It was driven in large part by the shift in momentum away from Democrats and back toward Republicans that we began to see in the polling data and betting markets that were forming in August and September.”

Michael Wilson, chief US equity strategist at Morgan Stanley, agrees that Republican gains will be upbeat. But he also cautioned that some volatility could occur in the near term.

“The results may not be clear on Tuesday night due to the delay in mail-in ballot counting, which means we can expect price volatility in stock markets to remain elevated and provide ammunition for bears and bulls alike,” Wilson wrote on Monday.

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Regardless of the outcome, Wall Street strategists generally agree that the outlook for stocks is favorable once we head into the midterm elections. This would be in line with history, which shows that the S&P 500 has generated a positive return in Every year after the midterm elections.


“There are some potential underlying causes for market strength after the midterm elections,” Barry Gilbert and Jeff Bushbinder of LBL Financial wrote on Monday. Primarily, election-related uncertainty is behind us, and markets don’t like uncertainty. But on top of that, midterms usually provide something of a course correction from the presidential election, as discussed above, and markets may anticipate the prospects for a better political balance going forward, no matter who’s in the Oval Office.”

In fact, post-midterm periods tend to be stronger than average.

“Since 1950, the average return for a year after the midterm elections has been 15%,” Note Capital Group analysts. “That’s more than double the return of other years over a similar period.”

However, the outcome of the election is only one variable for investors when they consider the long-term outlook for stocks.

“Our main motto for the past decade has been what happens in Washington, but collective factors outside Washington matter more,” said Keith Lerner, chief market strategist at Truist Advisory Services.

“Market history suggests to us that no matter which party is considered the winner in the midterm elections, there is likely to be a rush of some sort in stock markets in the near term,” said John Stoltzfuss, senior investment analyst at Oppenheimer Asset Management. “Multiple other factors including monetary policy, economic growth, corporate earnings and revenue growth as well as cyclical (current) and secular (long-term) trends are likely to drive market performance even more in the new year.”

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So before you decide to double down on the stock market because the historical pattern looks so good, keep in mind that The broader overall background is largely unprecedentedwhich means that you can’t rule out the possibility that this coming year will become one in history.

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