Tuesday November 8, 2022 is Election Day in the United States of America. In addition to Congressional "midterms" at the federal level, many state governors and other more local offices are up for grabs. Given how things shook out over Election Day 2020, things could get a little crazy.
...or, perhaps, not! But here's the Megathread for if they do. Talk about your local concerns, your national predictions, your suspicions re: election fraud and interference, how you plan to vote, anything election related is welcome here. Culture War thread rules apply, with the addition of Small-Scale Questions and election-related "Bare Links" allowed in this thread only (unfortunately, there will not be a subthread repository due to current technical limitations).
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Notes -
In the main CW thread, someone asked for predictions of electoral outcomes.
I'd now like to ask for predictions of financial markets, pending electoral outcomes. How do you think the stock market will respond if the GOP sweeps Congress or if Dems hold onto one or both chambers? And have you changed your investment portfolio in any way to reflect your thesis?
My prediction:
If GOP sweeps, markets rally 3% by EOD Wed. Narrow margins (e.g., 51 seat Senate) will result in 1-2%, whereas larger margins (say, 53 seats) yield 4+%.
If GOP retakes the House only, markets decline by 2%. If Dems retain both chambers, markets decline 4%.
Meanwhile, I expect markets tomorrow to end the day up 1% or so, perhaps in anticipation of a narrow GOP sweep.
The reason for my prediction is mainly that the public generally sees the GOP as being better at handling the economy than the Dems. Institutional investors may or may not agree with that assessment, but I expect retail will be bullish with a GOP win. Energy stocks will rally disproportionately given the GOP is far more friendly to domestic oil production and will not consent to windfall taxes, though green stocks will decline. Pharma should go up as Congress will be less likely to "negotiate" drug prices etc. But stocks in general should go up because the odds of corporate tax rate hikes will fall to near zero. While federal regulatory agencies will still be run by Biden's appointees, Congressional oversight will likely result in more muted policy issuances.
I'm long on stocks and have not made any portfolio adjustments as a direct result of the upcoming election.
Markets have now closed. Revisiting my predictions:
On election day, I predicted markets ending up 1%; S&P 500 increased by 0.3% in real life.
The day after, I predicted 2% decline if the GOP retakes the House only*, and indeed S&P 500 declined by 2.1% today.
*Elections aren't called yet, but PredictIt has GOP House and Dem Senate at 70%, followed by GOP sweep at 24% and then Dem retain both chambers at 14% (not adding up to 100% because PredictIt).
Now I'll be the first to admit that there are a billion confounding variables, including the mess with cryptos and FTX, but I'll still chalk this up mostly to a W because it's impossible to account for everything in the markets!
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I think the stock market has priced in results close to Nate Silver's final predictions (likely GOP house win, toss-up Senate). I think a surprise Dem hold of the house is positive for markets because it avoids tail risks associated with a government shutdown and/or debt ceiling crisis. Given a GOP house, Senate control doesn't matter that much to the things markets care about - legislation is gridlocked anyway because Biden has a veto, the Deep State can run the executive branch even if people can't get confirmed, and there are no Fed Governors with terms expiring during the next Congress. So I predict no obvious market response as long as the GOP do take the house.
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The data shows neither party is better or worse. Both support lots of government spending, which is good for the private sector . Healthcare stocks are a good investment regardless, owing to the tendency of Americans to get fatter and older ,which means more $ for healthcare paid for employer-sponsored coverage. Thus, healthcare stocks, especially health insurers, benefit both from two longstanding trends: corporations having record profits (some of which goes into health insurance) and Americans getting older and unhealthier , as well as more elective/unnecessary procedures. I don't see any of these trends changing.
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The other day, the Fed raised interest rates and Jerome Powell made a statement that the market interpreted as him suggesting that he was going to loosen monetary policy so it shot straight up. Then about an hour later, he clarified that their interpretation was wrong and the market crashed hard. Here's the best advice you can get on predicting how the market will react to news.
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