“It’s the economy, stupid.” – James Carville, strategist for Bill Clinton’s 1992 presidential campaign
Unlike the concerns surrounding Bill Clinton’s presidential campaign, the issues of today may be in fact, non-issues. The headline unemployment rate has reached historic lows, consumer confidence is higher than before the dot-com bubble, interest rates may no longer be “accommodative” but are no worse than neutral, tax reform boosted paychecks, and the stock market is hitting new records. A frustrated electorate can be found voicing their opinions on every twitter feed and news program, but the economic fundamentals do not support a mass recall of our governing party.
President Trump touted his polling numbers throughout his presidential campaign and has since maintained historically low approval ratings while in office according to ABC News’s FiveThirtyEight running calculation. While unimpressive overall, there has been a remarkable consistency to the data indicating most Americans disapprove of his presidency. Disapproval as a descriptor may be misguided when judging a man and a president with such a uniquely colorful resume. However, the approval or disapproval of President Trump may not fully encapsulate how Americans will vote for House and Senate candidates of the same party. According to the Reuters/Ipsos polling data, President Trump may face disapproval from Americans who disagree with his character or leadership style but are likely to benefit from his positions on tax reform and deregulation.
A rational investor should reference recent examples of misinterpreted polling results as a word of caution – the 2016 presidential election, Brexit, and the unexpected success of Germany’s AFD electoral performance. There appears to be a growing disconnect between headline polling numbers and the eventual results. We may witness yet another departure from traditional polling expectations next week.
All 435 House seats are up for reelection this November. Pundits, too numerous to count, are predicting the House will swing left lead by Nancy Pelosi as the new majority leader. As of October 31, 2018, ABC News’s FiveThirtyEight estimates an 85.4% chance of Democrats winning control of the House. Further supporting these predictions are the micro-level shifts in demographics and voting districts that tend to favor Democrats this election season.
The Senate is where things get interesting. Twenty-six of the 35 Senate seats up for grabs are held by Democrats, indicating that the odds favor a continuation — or increase– of Republican control of the upper body.
Regardless of Tuesday’s outcome, corporate CEOs will return to work on Wednesday morning, and American consumers will begin their holiday shopping season. A rational investor should maintain a long-term investment horizon while rebalancing portfolios when market volatility skews the target allocation beyond an acceptable tolerance band.
If you have any concerns or questions regarding the the impact of 2018 U.S. midterm elections on market activity, reach out to a member of the Willis Johnson & Associates team to schedule a conversation with one of our financial professionals.
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Tyler Baker is an associate wealth manager at Willis Johnson & Associates.Tyler enjoys guiding individuals and their families through the financial planning process, and he specializes in uncovering new opportunities that work to minimize client expenses, while increasing their savings.
Tyler graduated from the University of Georgia with two degrees, a Bachelor of Science in financial planning, and another in housing management and policy.