What will a new Congress bring? A new level of bipartisanship? More gridlock? What will be the impact to investors?
Markets hope the stage is set for a constructive relationship between the parties and pro-growth legislative initiatives, but more gridlock may be in store. That said, people who believe the conventional wisdom about politics may be surprised over the coming months. According to Greg Valliere of the Potomac Research Group, many conceptions about a “broken Congress” are based on Washington myths. The real winner in the elections may be investors. Stock market performance following a correction during a midterm year, such as we have just experienced, has been quite good.
Will a new Congress bring economic renewal? Not likely. Initially, markets hope the stage is set for a constructive relationship between the parties and pro-growth legislative initiatives. For bipartisan initiatives to move forward, however, both parties will need to be less beholden to positions held by the more extreme wings of their parties. Co-operating with the opposition may not be in the interest of either.
Six myths about the way Washington works. If you think the federal government is hopelessly broken, that the Federal Reserve is bitterly divided between hawks and doves, or that the budget deficit is fixed, you’re wrong, according to Greg Valliere, chief political strategist of Potomac Research Group, a DC-based political consulting form. He spoke November 4 at Charles Schwab & Co.’s Impact Forum in Denver. Valliere prefaced his remarks by positioning himself on the 50-yard line, not promoting the left, right, or any specific political ideology.
And the Winner is…Investors? The pullback seen in October is now just a memory and stock indexes are again pushing into record territory. Seasonality and the election cycle are lining up with still solid earnings growth and an expanding economy to help support further gains. Complacency is a risk but the analysts at Charles Schwab continue to believe the trend in US stocks is higher. Although history doesn’t always repeat itself, it can be a guide to the future. Stock market performance following a correction during a midterm year, such as we have just experienced, has been quite good. Subsequent 12-month returns have ranged from 12% on the low end to 58% on the high end, with the average coming in at just over 32%
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