The financial focus of the week is, how will the midterm elections impact your stock investments?
WHICH STOCKS ARE THE WINNERS IF WE HAVE THE EXPECTED OUTCOME?
- Democrats take House, GOP keeps Senate
- Overall stock market: Modestly bullish
- Winners: Drug stocks, defense stocks
While a divided government would make it hard for policy initiatives to move forward, stocks usually do well when there is a stalemate in Washington.
IF THE DEMOCRATS WIN THE HOUSE AND MOVE TO IMPEACH THE PRESIDENT, HOW WOULD THAT ALTER THE INVESTMENT LANDSCAPE?
- Markets hate uncertainty, so a possibility of a Trump impeachment could spark more market volatility.
- Even if the House impeaches Trump, a GOP-controlled Senate likely will not vote to remove him from office (similar to Bill Clinton).
- Markets typically recover quickly from macro-shocks. Consider the 2016 presidential election or Brexit.
DO WE OVER-ESTIMATE THE IMPACT OF POLITICS ON OUR INVESTMENT PORTFOLIOS?
- The stock market can thrive under Republican and Democrats alike. The S&P 500 has almost tripled over the past decade.
- 3rd quarter earnings report wave this coming week. Profits drive prices.
- From the end of October, in 18 of last 18 midterm election years, stocks finished higher by end of the year.
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