Markets Up After Midterms Result in Divided Congress

Everyone knows Gordon Gekko’s mantra in Oliver Stone’s Wall Street: “Greed is good.” Well, on the real Wall Street this morning, it seems the motto is “gridlock is good.” After a midterm election evening that saw the House of Representatives flip to Democratic control while Republicans improved their standing in the Senate, markets were up this morning, with the Dow Jones Industrial Average currently sporting a 1.4% gain for the day. So what about this divided government seems to have investors so enthused?

Speaking at the Bloomberg New Economy Forum (as reported on by CNN Business), Carlyle Group co-founder David Rubenstein noted that split governments have typically been good for stocks. He explained, “When you have houses controlled by different parties they actually have to compromise a bit if they’re going to get anything done, and this tends to sometimes be positive.” To Rubenstein’s point, some have speculated that infrastructure improvements could be an area where the two parties might actually be able to come together. If they do, the results could be increased economic activity.

Another potential theory floated by Jefferies chief global strategist Sean Darby is that today’s rise can be attributed to specific worries investors may have had about, as he put it, an “emboldened” GOP agenda. “The concern that an emboldened Republican party retaining both houses might have embraced another round of tax cuts, thereby increasing the deficit, has receded,” he wrote. At the same time, a true “blue wave” may have erased some of the Republican accomplishments that the markets liked, such as the regulatory rollbacks and the slashing of corporate taxes. In that way, this may have been the outcome investors had hoped for.

Of course another theory for why stocks are moving on up today has less to do with the actual results of the election and more to do with the fact that we finally have them. As many have noted, there are few things the markets hate more than uncertainty. Thus, now that we have a better idea of what the next two years will have in store for us,  investors can breathe again.

Whatever the true reason that markets seemed pleased with the election outcomes, the sharp increases are welcomed news for a market that’s been a bit bumpy as of late. While today’s activity is certainly no guarantee that things will get back on track, it certainly helps. Add in both the strong jobs report and GDP growth figures we’ve seen in the last month and it looks like that the bull might still have further to run.

Author

Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded DyerNews.com in 2015 to focus on personal finance and the emerging FinTech markets.

Other Articles by Jonathan Dyer

Robinhood Reveals More Details on Upcoming Retirement Account

After officially announcing plans for retirement accounts during an earnings call last month, Robinhood has now revealed more details about the upcoming feature and opened a waitlist for customers. First, Robinhood Retirement will offer both Roth and Traditional IRAs to users. With these accounts, customers will be able to invest in stocks and ETFs. Additionally, accountholders will be able to craft a custom portfolio and will be able to view...

Discover Announces 5% Bonus Categories for First Quarter of 2023

The popular Discover It card — which features 1% on all purchases as well as a slate of bonus rotating categories each quarter — has revealed what purchases will earn cardholders that 5% bonus starting January 1st. For the first quarter of 2023, Discover It cardholders can earn 5% back on grocery store, drug store, and select streaming service purchases. However, there are a few asterisks to note with this offer....

AllWork Raises $4.9 Million From FINTOP Capital 

A FinTech focused on freelancer payroll has closed a significant early-round investment. This week, AllWork announced that it had raised a $4.8 million round. The Series A was led by Nashville-based FINTOP Capital with no other participants. As a result of the transaction, FINTOP's Chris Haley and Rick Holton will join AllWork's board of directors. Previously, AllWork closed a $3.8 million seed round in 2019, bringing their to-date funding total to $8.7...