Last week Americans voted in the midterm elections, which yielded a ‘comeback’ for Democrats and a split legislature in Washington DC. The media weren’t sure what impact that would have on investors, with MSNBC publishing two articles (within hours of each other) stating that the likely government gridlock was both the BEST and WORST thing that could happen to Wall Street.
A week later is still too soon to know what impact we’ll have over the next couple years, but I continue to think increased government spending from both parties threatens early retirees from the stand point of increased inflation as I wrote in this POST a few weeks ago. In the last week, the S&P 500 has been volatile and lost about -4% of its value.
With respect to the longer term, Reuters published this interesting chart that shows that Wall Street typically has had positive years following midterm elections in the US:
As they say, historical performance is no predictor of future returns, but 78% of the time the market has grown following midterms – regardless of which party has claimed control in the House. The 78% historical rate is a little better than overall stock market performance, which has been up 70% of the time in ANY given year.
Not too much difference.
Does likely Washington DC gridlock concern you as an investor?
Image Credit: Pixabay; Chart: Reuters