Mid-Term Elections Shouldn’t Hurt Stocks

Election Day is November 6th in America. The entire House of Representatives and one third of the Senate are up for election. This article will analyze what that means for the stock market.

First, below is the University of Michigan chart. It shows consumer confidence in government economic policies.

This index is mostly a combination of which party consumers support. And also how good their individual personal financial situation is. However, there is a small group who look at individual policies objectively. Confidence varies based on the policy.

As you can see, economic policy confidence is currently very strong. That’s good news for the GOP in the mid-terms because it is the incumbent party.

However, the Democrats lost the 2000 presidential election even though economic confidence was high. This means economic policy confidence isn’t the only factor that affects the vote.

Mid-Term Elections – Polls Project Dems Could Win the House, But Lose Senate Seats

The Democrats are planning to reverse the Trump tax plan and raise corporate tax rates which would hurt corporate earnings. That would be bad for stocks.

However, if the Democrats don’t control both branches of Congress, that will be almost impossible. The Dems should pick up seats in the House of Representatives. They have a 7.7% lead in the generic congressional polls according to Real Clear Politics. Currently, the Dems are favored to win 205 seats and the GOP is favored in 199.

President Trump’s approval rating has increased, but his unfavorable rating is still 10.8 points above his favorable raring.

The problem for the Democrats is the GOP is expected to pick up two Senate seats, giving it a 53 to 47 lead. Even if the Dems win the Senate, President Trump can still veto a repeal of his tax cut which is exactly how President Obama vetoed the Obamacare repeal bills.

This means stocks shouldn’t have a big reaction to this election in the intermediate term.