Midterm elections and the stock market

It's like we are 2020 already

The House of Representatives changed their color for one night, under the control of the center-left Democrats, while Trump and the Republicans retained control of the Senate.

Election results support a historic pattern where the current president is losing in the midterm election at a time when voters test the power of the president, although the victory for the Democrats does not seem to be enough to flood Congress with a blue wave.

To break the situation through the prism of history, let's remember that in 2010 the Republicans won 63 seats when Barack Obama was president. Significant victory over the Democrats, who secured only 23 seats from this year's election. Elections for many analysts were in the shadow of a "referendum" against the ruling party where the majority usually has significant victories. With this limited victory, the Democrats will hardly be able to resist any policy that supports the economy.

Но какво означава всичко това за пазара на акции?

On Wall Street, the shares remain supported by the Dow Jones, S & P500 and NASDAQ. Positive market responses imply that market participants have a risk appetite resumed after increasing the chances of more fiscal stimulus.

It seems that the upcoming "hurdles" in legal policy will not negatively affect the stock, at least not at once, and especially the best-performing stocks, which can obviously continue with their growth even in an environment where the economic situation is getting worse.

For example, technology giants such as Amazon and Google, or major chip and plate manufacturers such as Qualcomm and Broadcom, are tied to the launch of 5G wireless technology rather than economic.

Retail stocks, however, may suffer after the Democrats' victory because tax cuts will stop. Their suffering, however, will not begin immediately because we are approaching the holidays.

After all, with or without restrictions, the Democrats will not have enough votes to stop Trump's trade war with China or change the Fed's plan to raise interest rates. Even more analysts anticipate an economic slowdown, now with the changed political environment, we have the following scenarios::

• Tariffs are jumping by 25% next year.
• FEDs raise interest rates four times to make sure they do not lose control of inflation.
• Shares continue to grow and reach new peaks.
• Consumers will continue to spend their money because we are entering holidays.
• Long-term investors "go out of the woods" after waited for the recent correction to end and re-enter the market.

Photo: Unsplash

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