Monday, August 30, 2010

NOVEMBER ELECTIONS AND THE STOCK MARKET

With upcoming November elections in the U.S., the democrats may very well lose their stranglehold on the House and the Senate.  By some estimates, the likely hood of Republicans gaining control of the House of Representatives has grown to 77% from below 30% at the beginning of 2009.  So how might this affect the stock market?

The last time the Democrats controlled both Houses of Congress and the White House was during the first two years of the Clinton administration.  They lost control of both houses to the Republicans during mid term elections in 1994.  So how did the market react?  Subsequent to the 1994 mid term losses and during the second half of the Clinton presidential term,  the stock markets gained over 34% in 1995. 

If history should repeat itself, which it often does, then we should all be hoping for resounding victories for the Republicans in November.  Also playing in favor of the markets, the third year of a presidential term is historically the best, as far as the stock market goes. 

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