U.S. stocks are likely to enjoy an “impressive rally” this week as Republicans could take at least one chamber in the midterm elections, predicts the chief executive of one of the world’s largest independent financial advisory, asset management and fintech organisations.
The prediction from Nigel Green of deVere Group comes ahead of Tuesday’s U.S. midterm elections in which all U.S. House and term-expired Senate seats are voted on.
He notes: “History teaches us that a sitting president’s party sheds some level of power during these elections, splitting the executive and legislative branches of the U.S. government.
“This typically results in gridlock as lawmakers are unable or unwilling to agree on major legislation, meaning that substantial laws are either not approved or significantly reduced in scope and impact.”
The deVere CEO continues: “This stalemate, while often infuriating for voters, is often good news for stock markets.
“Why? Because a lack of sweeping legislative changes means there is less uncertainty for businesses.
“The status quo usually means that corporations can push on with their plans and investments without the risk of everything being upended by new laws and requirements.”
Some sectors will be more impacted than others, as always.
Reforms to legislation on big tech can be expected to come to a halt due to the gridlock, which “represents upside for the tech stocks.” Pharmaceutical and biotech stocks could also capitalise on a Republican wave, as Democrats are pursuing a bill to lower prescription drug prices. Meanwhile, energy stocks could be boosted should Republicans take at least one of the chambers because a windfall tax on oil producers proposed by Democrats is likely to be blocked.
As ever, the deVere CEO emphasizes the importance of a trusted investment strategy.
“Ensuring your portfolio is properly diversified is one of the fundamentals of successful investing. Having a well-diversified portfolio across asset classes, sectors and regions means you are best-placed to mitigate risks and best-placed to take advantage of important opportunities.”
Nigel Green concludes: “Midterm elections have heralded positive stock market performances in the past and we expect to see an impressive rally this time too.
“This will be cheered by many investors who have endured a pretty bleak time on Wall Street this year.”