Election Day Fallout: What a Republican-Controlled Senate Means for Wall Street
As the dust settles on Election Day, Americans are eagerly awaiting the implications of the results on the country’s fiscal policy. While the presidency grabs most of the attention, the makeup of Congress holds significant sway over the economy and businesses.
A Shift in Power
The Associated Press has called the Senate for the Republicans, marking the first time in four years they’ll control the upper house. With at least 51 seats secured, the GOP’s victory is expected to have a positive impact on Wall Street, based on historical trends.
Fiscal Policy Implications
A unified government, with Republicans holding the House and presidency, could facilitate the passage of certain legislation. However, a divided Congress, with Democrats controlling the House, may lead to political gridlock. One certainty is that corporate tax rates are unlikely to increase from their historically low 21%. This is a welcome relief for businesses, which have benefited greatly from the current rate.
The Impact on Share Buybacks
With the threat of tax hikes removed, companies are likely to continue their share buyback strategies. The S&P 500 companies have spent nearly $236 billion on share repurchases in the June-ended quarter, and over $7 trillion in the past decade. Tech giants like Apple and Alphabet have reaped significant benefits from buybacks, lifting their earnings per share.
What History Tells Us
An analysis of 75 years of data reveals that Republican control of the Senate has resulted in an average annual return of 11.3% for the Dow Jones Industrial Average. While this is promising, it’s essential to note that patience, not politics, is the key to successful investing. Historical data shows that the average annual return for the Dow has been decisively positive, regardless of party control.
Investing Insights
Researchers at Bespoke Investment Group have found that the average S&P 500 bear market lasts approximately 9.5 months, while bull markets endure for around 3.5 times as long. This underscores the importance of giving businesses time to perform, regardless of the political landscape.
Seizing Opportunities
In a rare move, our expert analysts issue “Double Down” stock recommendations for companies poised for significant growth. These opportunities can lead to substantial returns, as seen with Amazon, Apple, and Netflix. Now is the time to invest in three incredible companies before it’s too late.
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