My Mom’s Portfolio : October 2018 Passive Income Report

Historically, the Market Performs Well After Midterm Elections

Regardless of party affiliation, investors may try to gauge what will happen on election night and whether to make any adjustments accordingly. According to Oppenheimer the good news, from a financial perspective, is that historically midterm elections have not had a major impact on the financial markets or provided reasons for investors to make major changes to their investment plans. It’s critical to take a step back and let history be our guide.

Midterm elections are rarely kind to the political party of the sitting president. 2018 has not been different. Presidents have almost always dropped House and/or Senate seats in the first midterm election, with only a few exceptions. George W. Bush, in the aftermath of 9/11, was the only president able to pick up both House and Senate seats. The number of seats lost often correlates with the president’s approval rating. Less popular presidents have lost upwards of 40 House seats and four Senate seats, while popular ones have been able to stem the losses.

Markets Even Seem to Prefer a Divided Government

Investors fear that a divided government—with a Democratic-controlled House of Congress in opposition to a Republican administration—could derail President Trump’s agenda and put an end to the historic bull market. But throughout history, markets have often performed better with a divided government.

While changes in Congress could lead to more legislative gridlock, the President’s ability to act independently may influence markets more. Of course, the elections will impact what policy decisions can be made. Since taking office, President Trump has signed over 175 bills into law including the landmark Tax Cuts and Jobs Act. If Democrats take control of even one chamber of Congress, it will be difficult for the full Republican agenda to be enacted.

Regardless of the makeup of the House though, the President can still influence policy such as trade agreements by issuing executive orders. The prospect of tariffs and a strong U.S. dollar is a risk to global growth.

Read this LAST sentence again. More tariffs and trade wars are a risk to the stock markets.

Policy Decisions do have an impact on sector performance over the short term. If you want to know which sectors, click the link next to the Source to read the full article. What is the bottom line here that I want to pass on to you? Political surprises and machinations may have short-term market implications but have proved to be mere blips in the long-term advance of the market.

The market has weathered “unique” political environments before, and the past has generally demonstrated the value of developing a long-term plan and sticking to it, regardless of who is controlling Washington. Check out below graph if you had invested 10.000 $ fully invested since 1896 in the Dow. You would hit the 6 million dollars…what do you think about that?