Election Reminder

[/fusion_text][fusion_text]The midterm elections are just around the corner. Both sides will try to convince us that the world will come to an end if the other side takes control of the House of Representatives (“the House”). It is common (but WRONG) to infer that if your party loses any given election, that the economy will suffer and stocks will drop.

Since 1853, the returns on stocks have been nearly identical with a Republican administration and with a Democrat administration. That’s not to say that the experience of investors matches the stock market returns. A Vanguard study suggests that Republican investors earn lower returns when Democrats are in power. The same study suggest that Democrat investors earn lower returns when Republicans are in power.

How could this be? Investors tend to get overly pessimistic when their party is not in power, and they sell some of their stocks. Thus they miss out on the gains that inevitably occur. It’s a self-fulfilling prophecy.

The stock market rises roughly 2/3 of the time. Stick around for it, even if you’re bummed with the November results.[/fusion_text][separator style_type=”single” top_margin=”” bottom_margin=”” sep_color=”” icon=”” width=”” class=”” id=””][fusion_text]

Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. CTW gathers its data from sources it considers reliable. However, CTW makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.