US Midterm Elections in August Will Impact Markets

Lawmakers in Washington are preparing to hit the campaign trail full-time in August. That’s typically not great news for the stock market.
Historically, midterm elections have not been kind to stocks, according to research released earlier this year by Sam Stovall, chief equity strategist at S&P Capital IQ.

Going back nearly 70 years, Stovall said the S&P 500 has suffered its worst six-month period of any four-year presidential term in the second and third quarters of a midterm election year.

The S&P 500 bucked the trend in the second quarter, gaining over 5%. Overall, the market heads into the midterm election season with stocks near all-time highs and market volatility near historic lows.

For the most part, investors expect the current gridlock in Washington to continue, according to a recent survey of 22 market strategists by CNNMoney. But there is some uncertainty about whether the Republicans will gain control of the Senate.

“Midterm elections historically have been disruptive to markets, and the possible shift in control this fall will likely make for a great deal of political fireworks,” said Alan Gayle, senior investment strategist at RidgeWorth Investments.

A poll by Quinnipiac University last week showed that Americans are divided over whether they want the GOP to control the Senate.

via CNN

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza