Three Ways the Midterm Elections Impact Investors

Midterm elections are typically bullish for the stock market.
According to the Stock Trader’s Almanac, U.S. stocks jump an average of 2.7% in the eight days surrounding the November midterm congressional elections, dating back to 1934. That includes the five days leading up to the election and the three days after the election. True to form, this November has been no different.
The Dow Jones Industrial Average – which is the index the Almanac has tracked since 1934 – was up 4.4% from Oct. 28 through Nov. 6, spanning eight trading days. The returns were nearly as impressive for the benchmark S&P 500 at 3.5%.
But here’s the thing: Stocks were already performing quite admirably before the midterm elections entered the national consciousness. In the eight trading days prior to the Almanac’s traditional test period, from Oct. 16 to 27, the S&P advanced 5.2%. The Dow increased 4.2%, almost identical to its performance over the ensuing eight-day election span.
The midterm elections may have kept the baton moving. But it wasn’t the reason stocks are now back in record territory. And if stocks continue to advance, it won’t be because of the midterm elections.
Ten days removed from the Republican Party’s decisive victory, Wall Street has turned its attention to  earnings season, Black Friday and the start of holiday shopping season. Those events will determine whether how long this epic rally continues.
On a macro level, the impact of the midterm elections on Americans’ investing habits has already come and gone. However, its reverberations could be felt in certain specific sectors of the market for years to come.
As you undoubtedly know by now, the Republican Party took control of the House and the Senate in resounding fashion. Though we still have a Democratic president, the GOP now has full control of Congress. And that means policy changes are sure to follow.
With that in mind, here are three ways a Republican-controlled Congress could affect the stock market over the next two years:

  1. Expect a Big Energy Push. President Obama has led the charge for America becoming energy independent by 2020. But he’s also thrown a few road blocks up in front of things like the Keystone XL Pipeline, which would expand an existing oil and natural gas pipeline from Oklahoma down to the Texas Gulf Coast. A Republican Congress will try to push through the Keystone XL Pipeline and other pipelines. More oil exports are likely to be approved. And those moves should benefit big-oil companies such as Exxon (NYSE: XOM), Chevron (NYSE: CVX) and natural gas giant Chesapeake Energy (NYSE: CHK).
  1. More Defense Spending. Conservatives love to spend on military. That’s no secret. Therefore, a Republican-controlled Congress should theoretically benefit defense contractors such as Lockheed Martin (NYSE: LMT) and Textron (NYSE: TXT). Those are companies that took a financial hit starting in March 2013, when sequestration took effect and enacted $500 million in military spending cuts over the course of the next decade.
  1. Quicker Interest-Rate Hikes. Republicans tend to be more hawkish than Democrats – which is financial jargon for saying they want higher interest rates. The Federal Open Market Committee has recently hinted at finally raising rates from near zero, perhaps as early as next summer. With the Republicans in Congress, don’t be surprised if an especially hawkish new member or two gets appointed to the FOMC … thus expediting that long-awaited interest-rate hike.

Bottom Line
Our government is so screwed up these days that little gets accomplished no matter who’s in office. So don’t expect a Republican Congress to suddenly change your life.
However, with a majority in both houses, Republicans will certainly try to aggressively push forward certain agendas that have been held up by a Democrat-controlled Senate. Some of them could have an impact on specific areas of investment, if not the stock market itself.

Six times BIGGER Dividends – with this one stock 

The average yield of the Dow has sunk to 2.1%. That’s just sad. However, we know of one group of investors collecting up to $550 every 30 days from a little-known investment that yields a whopping 12%! That’s roughly six times bigger than the average yield of the Dow. If you’d like to tap into this income stream, and earn six times bigger dividends, click here for our full report on this opportunity. 

To top