Midterm Results Could be Good for the Stock Market

Market analysts are predicting a gridlocked House and Senate could be the best news Wall Street has seen in a while. According to financial journalist Jed Graham, if the stock market could not continue to enjoy total GOP control (the best-case scenario most agreed), “A divided Congress has the best track record. The worst combination has been a unified Congress controlled by the party in opposition to the president.”

After reviewing S&P 500 returns during each two-year election cycle from election day to election day, the best outcomes occur when Congress is divided, Graham reported. Those outcomes hovered just under 19 percent. On the other hand, gains averaged 15.7 percent when Congress was unified under the opposition party, he said.

As if to drive the point home, U.S. stocks opened much higher this morning. The Dow Jones was up more than 200 points in the early morning. The much-predicted “blue wave” of democrat wins in Congress did not materialize, which is likely also part of the reason the markets recovered this morning after pre-election volatility.

Mark Hamrick, senior economic analyst at Bankrate.com, warned the change in leadership in the House of Representatives will potentially “make things tough on President Trump” despite other analysts’ predictions that “The Trump agenda is not in serious jeopardy. “House democrats will turn up the pressure on President Trump through investigations and oversight,” Hamrick said.

Kate Warne, an investment strategist at Edward Jones, was not particularly concerned. “A split Congress means that gridlock is more likely, and that’s been fine for markets in the past,” she said.

Are you worried about Wall Street? How about housing?