https://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/articles/how-the-midterms-impact-the-market-in-2019U.S. News: Invested
Mon 2/11/2019 5:23 AM
U.S. News & World Report
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How Midterms are Impacting the Market This Year
Feb. 11, 2019
With the federal government shutdown over and the 116th Congress finally getting into gear, how will a divided congress affect the stock market in 2019? Let's think about the economics behind the question.
With a united Congress, obviously it's easier to pass legislation than if the Congress is divided. But does that mean a united Congress is always better for the economy and benefit the stock market? Not necessarily. It depends on the agenda of the dominating party.
If the presiding party is all for economic stimulation and free trade, likely we'll see a stronger economy under the united Congress. In contrast, if the dominating party is for trade protectionism, increased tax and tightening regulation, a united Congress may as well contribute to slower economy.
From 1981 to 2018, we had an undivided Congress 28 out of 38 years, and a split Congress 10 years. An undivided Congress has seen the highest and lowest stock returns in the past 38 years. When Congress is united and dominated by Republicans, and when the president is from the Democratic Party, we see the highest average annual rate of return of the S&P 500.
On the flip side, an undivided Congress also delivered the worst stock performance. During the eight years when Democrats controlled both the Senate and the House, with a Republican president, the S&P 500 saw the lowest annual return of 3.87 percent.
Regardless of the party affiliation of the president, periods of divided Congress saw pretty good returns. There were six years in history that mirrored the current situation with a Republican president, Republican controlled Senate and Democrat controlled House in the Reagan administration from 1981 to 1986. During those six years, the S&P 500 averaged an annual return of 10.78 percent, ranking third as compared to the other combinations. – Meg Luo
Can this data from the past be used to predict the future? Click here to read more.
Recommended reading on this topic:
Stock Trading 101: Buying and Selling Stocks
Buy, Sell or Hold: Ten Ways to Trade the U.S. Election
This Is How to Profit From a Trade War
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Data as of February 11th, 2019
Today's Financial Roundup
Global stocks are on the rise, Wall Street is flat. World markets generally climbed today as traders kept a lookout for developments ahead of a new round of trade talks between American and Chinese officials in Beijing this week. Wall Street was set for a flat open. Dow futures added 0.1 percent to 25,093.00. The broader S&P 500 futures gained 0.1 percent to 2,709.80.
Trump to call for AI investment. President Donald Trump plans to sign an executive order directing federal agencies to prioritize research and development in the field of artificial intelligence. The plan, called the American AI Initiative, is intended to enhance national and economic security and improve Americans' quality of life. Here are 10 of the best AI stocks you can buy.
Business as normal for Amazon. First it was a heart-wrenching tweet that he and his wife were getting a divorce after 25 years. Then a tabloid revealed that he'd been having an affair, releasing texts and photos of him and his mistress. And now Amazon.com (ticker: AMZN) CEO Jeff Bezos is accusing The National Enquirer of trying to blackmail him. But despite the all-consuming personal drama, analysts and experts don't expect it to make much difference to Amazon itself.
Earnings today. Many of the biggest companies have already reported quarterly earnings, but dozens of companies are stepping up to the plate today to deliver their reports. The biggest company we're watching today is Chinese internet giant Baidu (BIDU).
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