Sizing Up the Election

Telemus Weekly Market Review October 17th - October 21st, 2022

As we are reminded every time we turn on the television these days, the mid-term elections are a couple weeks away. Mid-term elections tend not to be as impactful on market behavior as presidential. However, they can swing sentiment based on expected policy changes. So how might markets move depending on the outcome?

Markets tend to prefer gridlock. Not that gridlock is necessarily good for policy, but it often means the status quo will remain and that things won’t change. Less change means less uncertainty for investors. A Republican majority in either the house or the senate would have a greater probability of near-term grid lock. Therefore, we would expect Republicans taking a chamber to be viewed favorably by markets. Should democrats retain control of the house and senate, investors may express a greater interest in potential benefactors of democratic policies such as clean energy and health care.

The prospect exists for Democrats having a similar circumstance as they’ve had the last two years. Having a majority but not strong enough where they can push policies without having full cooperation the entire caucus. With a presidential election two years out, under this scenario, we might experience some progress on policy, particularly in areas where there is sufficient bi-partisan support.

This election cycle has been unusual as there has been a lack of market attention on the mid-terms. Typically markets begin to see volumes slow and volatility eases as investors await the outcome of the election before determining how to position portfolios. This time around, we think the market is likely to give little attention to the final outcome as focus is expected to remain on more pressing influences such as inflation, interest rates, and a slowing economy. These factors have a much greater impact on asset prices than speculation around policy. In addition, polls seem to indicate it is reasonably likely that Republicans will take at least one chamber. Thus, gridlock will ensue, and the investment community seems willing to return its focus back toward the key themes that have driven markets thus far in 2022.

All opinions expressed in this article are for general informational purposes and constitute the judgment of the author(s) as of the date of the report. These opinions are subject to change without notice and are not intended to provide specific advice or recommendations for any individual or on any specific security. The material has been gathered from sources believed to be reliable, however Telemus Capital cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Investment decisions should always be made based on the client's specific financial needs, goals and objectives, time horizon and risk tolerance. Current and future portfolio holdings are subject to risk. Risks may include interest-rate risk, market risk, inflation risk, deflation risk, currency risk, reinvestment risk, business risk, liquidity risk, financial risk, and cybersecurity risk. These risks are more fully described in Telemus Capital's Firm Brochure (Part 2A of Form ADV), which is available upon request. Telemus Capital does not guarantee the results of any investments. Investment, insurance and annuity products are not FDIC insured, are not bank guaranteed, and may lose value. Any reference to an index is included for illustrative purposes only, as an index is not a security in which an investment can be made. Indices are unmanaged vehicles that serve as market indicators and do not account for the deduction of management fees and/or transaction costs generally associated with investable products.

Advisory services are only offered to clients or prospective clients where Telemus and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Telemus unless a client service agreement is in place. All composite data and corresponding calculations are available upon request.