Midterm Elections
Stock bulls are hoping for one crucial outcome from the US midterm elections: a divided Congress. Why? Because equities tend to benefit from gridlock in Washington since it tends to produce few if any a major policy shifts.
The two most likely outcomes this midterm cycle -- either a Democratic president with a Republican House and a Democrat Senate or a Democratic president with a full Republican Congress -- have benefited equity investors in the past. In each of the scenarios, the S&P 500 has proceeded to post annual gains ranging between 5% and 14%, according to Comerica Wealth Management, which cited data from Strategas Research Partners.
“Stocks perform best in a divided government,” Victoria Greene, chief investment officer at G Squared Private Wealth, said. “Balance of power and gridlock is something markets like.”
Inflation Report
Few economic announcements have mattered more this year than the consumer price index, given that tamping-down inflation is the central priority of the Fed. Barclays Plc strategists, who plotted the S&P 500’s performance against 10 major economic indicators, found that in the past decade stocks have never reacted as negatively to any economic indicator as they are now to the CPI.
“We may have a shot at getting some clarity toward the end of the fourth quarter on whether inflation is slowing and if the Fed will ease up on rate hikes,” Scott Ladner, chief investment officer at Horizon Investments, said in a phone interview. “Then that could provide calmness in the Treasury market and push investors to take on risk in equities once again.”
This article was provided by Bloomberg News.