From the night President Donald Trump defeated Hillary Clinton to the day before the midterm elections earlier this month, Trump set a stock market record. Despite the turbulence this year, the 28% rise in the S&P 500 from Trump’s victory to the eve of the midterms surpassed that of any President over the past 64 years. Under President Dwight Eisenhower, the S&P 500 rose 29 percent from his election in November 1952 through November 1954. The market closed out the week of the midterms up 3 percent, and if past trends hold, its set to surge much higher with our newly divided Congress.
According to Market Watch:
“‘Gridlock is good’ is an oft-heard mantra when it comes to stocks. It comes from the notion that the likely inability of lawmakers and the president to accomplish much means politicians won’t be able to do much harm nor to undo market-lifting measures already in place.” But is it true? As it turns out, the market tends to not like politicians meddling in it, regardless of what end of the political spectrum they’re part of.”
See the chart below for reference:
While Democrats did retake the House, Republicans still hold the Senate. And even more important – Trump’s 2016 victory over Hillary Clinton. It’s highly unlikely the market would’ve responded favorably to a pundit predicted “blue wave.” Without Republican control of the Senate, Democrats would relentlessly pursue impeachment proceedings for the next two years, and it’s likely the Trump tax cuts would eventually be repealed. That kind of uncertainty is hated by the market.
Even billionaire Clinton donor and Obama megadonor Marc Larsy predicted chaos if Democrats had a blowout victory in the midterms: “If Congress shifts, you’ll have more investigations. You’ll have more issues. And from a business standpoint, I think people will then step back,” the hedge fund manager told CNBC. “Congress today, they seem to be supporting pretty much anything President Trump does,” Lasry said. You could argue it back and forth — but for business, it’s good.”
Crisis averted? Until 2020, at least.
