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Our Initial Thoughts on the Election

This year’s election looks to have the highest voter participation rate since 1900. However, for the first time in 20 years, Americans woke up today to an uncertain Presidential election outcome.

As of right now, the election remains too close to call and both parties have signaled optimism. So far, it looks like the Senate will remain under narrow Republican control.

What does this mean for markets?   

Last time there was election uncertainty with the Gore/ Bush Florida recount in 2000 the S&P500 saw a pullback of over 10%. It is probably a matter of hours before recounts and lawsuits move to center stage. Recounts and legalities will take time to resolve and may result in heightened volatility.

Regarding a divided Congress, voters have historically shown that they like a check on the presidency. As the chart below depicts, since 1950 the average S&P500 return has been over 17% under a split Congress, higher than both a unified Democratic (10.7%) or Republican Congress (13.4%).

In the current environment, a split government points to a more predictable trade policy, plus the continuation of the low tax regime, including capital gains and personal and corporate taxes. It may be easier for markets to get comfortable with the upcoming policy (either Democrat or Republican).

For questions or to learn more, please contact a member of Withum’s Wealth Management Services Group.

Yesterday’s positive market reaction seems to imply investors prefer gridlock. A split Congress in general has had the impact of limiting the more extreme proposals in areas such as big tech, pharmaceuticals, energy, and banking to name a few hot button issues.  In terms of providing meaningful fiscal stimulus soon, gridlock might be a headwind, but Congress could come together as they did back in the depths of the Covid pandemic.

It could be days, or even weeks, before we have the official results. A delay in getting official results was anticipated and patience will be paramount as we wait for clarity. This is our initial take given limited information and we look forward to sharing further updates as the process works its way through.

Withum Wealth Management Services

Important Disclosure: This email is limited to the dissemination of information pertaining to Withum Wealth Management (“Withum Wealth”) and general economic market conditions. Nothing contained herein should be construed as personalized advice, or an offer or solicitation to buy or sell any securities. Past performance is not indicative of future results, and there is no guarantee that the views and opinions expressed in this commentary will come to pass. Withum Wealth is neither a law firm nor an accounting firm, and no portion of this commentary should be construed as legal or tax advice. You are advised to consult with separate legal or tax advisors with respect to any legal or tax advice. Withum Wealth does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to WWM’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Withum Wealth is an investment adviser registered with the SEC. For information pertaining to the registration status of Withum Wealth, please refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov). For additional information about Withum Wealth, including fees and services, send for our written disclosure statement as set forth on Form ADV Part 2A.
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