If you turn on your television or surf the web, it won’t take long for you to become aware that the U.S. will have midterm elections in November. In many states, primary elections will happen beforehand and many have already taken place this summer.
When thinking about being bombarded by political news, it might help remembering that the original 24-hour news cycle began only about 50 years ago with the birth of CNN (Cable News Network). Today financial news networks like Bloomberg TV, CNBC, Fox Business and Yahoo Finance, to name a few, are also only a click away when you want to know the latest finance and market news. All of this means that we have a constant overload of information immediately available any second of any day and it can simply seem too much.
Governing, politics and political campaigns have also changed significantly in these almost 50 years. The growth in news channels, platforms and apps have also created hyper personalized “channels” of news sources based on one’s personal beliefs and political leanings. And while greater access should mean a more informed electorate, this hasn’t exactly translated to better and more factual information. The internet, social media and the recent evolution of sophisticated artificial intelligence has significantly raised the bar in what’s fact, fiction or a deep fake.
The Mid-terms
There will be no shortage of news, information, facts and plenty of fiction with the upcoming midterm elections. For the U.S. House of Representatives and one-third of the U.S. Senate, there’s a lot on the line for both political parties and the Trump administration.
Congress enjoys one of the lowest job approval ratings of all times and President Trump’s approval ratings are near their all-time lows. Regardless of the President’s political party, only two U.S. Presidents have gained or kept control of Congress during midterm elections: Franklin D. Roosevelt and Jimmy Carter, respectively. The outcome will determine who controls the agenda for the following two years and leading up to the Presidential election in 2028.
Recent polling suggests that Democrats will gain control of the U.S. House, and while the Senate was a longer shot, several Senate races have become more competitive and some cracks have emerged after President Trump endorsed the opponents of sitting Republican Senators John Cornyn and Bill Cassidy. Both have the remainder of their terms to serve and little to lose if they oppose the administration. If the President and Republicans lose at least one chamber, it’s almost certain that Democrats will start up investigations and broader policy negotiations will get harder and demand more consensus.
Economic and Market Impacts
So what does all of this mean for the economy and the markets when Americans sour on the current state of political affairs? It’s understandable that investors question and correlate election outcomes with their impact on the markets and the economy. But history has repeatedly shown that while there may be short term market volatility following election results, markets tend to figure it out and move in response to business and economic conditions and not political ones.
The markets would react negatively to the government adopting draconian proposals that would threaten basic principles of capitalism, but the recent experience of Trump tariffs can serve as a good example. Initially, the global markets were shocked by the prospect of across the board taxes that would result in higher costs and higher inflation. The result of the tariffs was both of these outcomes, but companies and consumers adjusted and generally accepted them.
The U.S.Supreme Court later ruled the tariffs illegal and refunds by the government and businesses have begun. President Trump announced another series of tariffs using a different section of the law and markets barely reacted. Whether these new tariffs are again deemed illegal remains an open question, but in the meantime, it’s very likely that the markets will continue to navigate as they have in the past.
What Should Investors Do?
Regardless of one’s political party or political persuasion, those who have the right to vote should do so. While the news cycle these days seems to only discuss the negatives, and with an immense scrutiny on politics and government, Americans still enjoy what many other citizens in the world do not – free and fair elections. Over the years there have been numerous examples of candidates running for office winning or losing by as little as ONE vote, so every vote matters.
What matters just as much as voting is becoming familiar with the issues that matter to your family, business and the community. In a world of immediate satisfaction and narrowly finding “us” through “our” specific channels out there, it’s important to remember that life, and politics, is about compromise and finding a common ground. It’s very likely that the outcome of the midterm elections will result in political gridlock, but as the markets have experienced, gridlock prevents progress from being made, but it also prevents the worst outcomes as well.
As America celebrates its 250th anniversary, one observation can safely be made: 250 years is a long time and a lot has happened since, but we’ve had a lot more successes than failures to get here. It’s up to all of us to do our part to make sure those who are celebrating 250 years from now can look back and say the same.
The foregoing content reflects the opinions of Axis Wealth Partners, LLC and is subject to change at any time without notice. Content provided herein is for informational purposes only. Axis Wealth Partners does not provide tax or legal advice. Investing in securities involves risks, including the potential for loss of principal. There is no guarantee that any investment plan will be successful or that markets will act as described in this commentary, or as they have in the past.