The Election Brought Clarity, But Is It All Good News For Investors?

by Financial Design Studio, Inc. / November 18, 2018

In the days following Tuesday’s election we have seen the market move higher.  It has been regaining the momentum lost over the month of October.

Tuesday’s election results have brought clarity for the months ahead.  Remember, the market does not like uncertainty so with the elections behind us is it all good news?  The Republicans strengthened their lead in the Senate and the Democrats won back control in the House of Representatives.

What does a split Congress mean for the markets?

We were on a trajectory of fast, high growth in the US economy.  This growth was leading to higher interest rates with the worry of higher inflation.  Many analysts felt like the economy was growing too much, too fast. We think the split Congress provided a win for both parties and for the markets.  This outcome was expected. Investors now believe there are controls in place so that many of the items Republicans were able to pass previously, don’t continue at full speed ahead.  We believe this is good for investor sentiment.

Investors and analysts were wary that this market trajectory could not continue due to the changes that were bringing it about like tax cuts and increased employment.  With the split Congress check in place this may actually keep interest rates from rising as fast. This is important because we can expect inflation to likely stay in check and become less of a worry for the market.

The other concern of Global Trade remains a wild card to see how it progresses.  The elections shouldn’t impact this too much but we hope that if anything, it makes the US position stronger.

The election results do bring some disheartening expectations, mainly with the potential for increased gridlock.  We do expect that it will be harder for anything to pass. We believe a big increase for investigations into various issues will come to fruition.  This is only going to further polarize the two sides and continue the bantering we hear often in media stories.

Overall we believe the outcome can be positive for the market and we do expect to see a market bounce leading up to year-end.  If both sides want to work together we believe progress can still be made.

Wondering how this affects your investments? Schedule a call with Michelle and Steve to discuss your portfolio today.

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