Mid-term election and stock market

The recent US mid-term election has been fascinating because the result almost shocked everyone. Some called it historic because it is better than historic norm for the President’s party who usually loses a lot of seats in Congress.

One interesting comment I heard quite often is that a divided government is better for the stock market because no major legislation can be passed. Wow, finally a dysfunctional government can do some good. LOL!  No uncertainty is good for the stock market. The status quo is good for the stock market. Is this so? Is the status quo good for the economy? I know stock market is not the economy, but economy eventually will determine stock market performance.  Aren’t we facing many pressing issues? Climate change, crumbling infrastructure, health care, education, on and on. Is this a bit short-sighted? I am not surprised that it is short-sighted which is the nature of the stock market. Investors measure public-traded companies’ earnings quarter by quarter.

Here is another comment I heard.  Democrats in White House and Republican-controlled congress is the best for economy based on historical data. Is this a bit too technical analysis like? Only look at the surface of the data without probing the logical causation behand it.  Can anyone provide a fundamental analysis?

Some believe that Republican party is better at managing economy. Oh really? I understand why they are coming from. They believe that being careful on spending to avoid deficit financially prudent. Let’s look deeper. Cut social program spending will impact many grassroot families spending right away because they have little savings and all they have will be spent which is part of the consumption. I know each of them spend is small but magnitude matters. 75% of the economy is driven by consumer spending. Cutting social program will reduce consumer spending right away.

On top of that, deregulation in the financial industry? Want another financial crisis?  Deregulation on environmental protection?  We all know how expensive natural disaster caused by climate change is now.

I can be totally biased.

Published by Worthfy

Financial literacy and counselling

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