Monday, November 05, 2018

My Strategy for Election Outcomes

"Elections have consequences...." - President Barack Obama, three days into his first term.

I've been thinking about impact of possible midterm outcomes on the stock market.     Here are my conclusions for the scenarios in order of likelyhood:

  • Scenario 1:   Democratic majority in the House, Repblican majority in the Senate.  I expect the stock market to continue upwards since Wall Street will expect gridlock.   However, President Trump may use the opportunity to cut more deals with Congression Democrats, which will require more spending and increase the deficit.    That will lead to a signficant decline in the stock market.
  • Scenario 2:   Republican majority in both the House and Senate.    I expect the market will continue to volatile, but have a directional upward trend.    There will continue to be signficant uncertainty in economic and foreign policy.
  • Scenario 3:   Democratic majority in the House and Senate.   I expect an initial drop in the market, followed by short rally.   After that, the market action will depend on how intense the gridlock becomes.   Signficant gridlock will result in a signficant market decline.
Since I believe Scenario 1 is the most likely, I will be staying invested until 2019, using the tradable ralllies to take some profits and reducing our equity exposure for a possible decline/correction in early 2019.

For more on Strategies and Plans, check back every Monday for a new segment.

This is not financial or investment  advice. Please consult a professional advisor.

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