“I wanna be elected!”
The November 4, 2014 elections – called the mid-terms – had little immediate impact on the stock market following the release of results. Of course, the stock market is a “discounting mechanism” meaning stock prices adjust immediately and continuously based upon expectations. It was widely predicted well in advance of Election Day that republicans would probably pick up many seats in congress and governorships. Had that proven not to be the case it could be reasonably expected that the stock market would have moved materially higher or lower as a function of the “surprise” outcome.
Longer term, the implications of elections influence the trend of stock prices (individually, and for the broad market) as campaign promises become laws. For example, if many officeholders were to have run on a platform that would be expected to be harmful to a particular industry (think – global warming initiatives and coal miners) then the prices of the stocks of companies expected to suffer would begin to adjust as proposed legislation began to take shape and the likelihood of passage became more clear.
Some pundits have noted that financial asset prices over the past five years have become much more correlated to political and geo-political forces than the decades prior. We at Sigma Investment Counselors share that view and as a result, pay very close attention to such factors.
All questions and comments are welcomed.
Bob Bilkie, CFA®