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Could the Mid-Term Elections Cause You to Lose Money?

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Could the Mid-Term Elections Cause You to Lose Money?

In just a couple of months the country will vote in the mid-term elections. This is the election that falls between presidential elections. On the Federal level, all seats in the US House of Representatives are up for election every two years and a third of US senate seats as well. There is a tendency for the party that did well in the presidential election to lose seats in this “off year” election. Because of the potential for a significant shift in political power on the Federal level, investors are wise to pay attention. Could the mid-term elections cause you to lose money? Here are some thoughts on the subject.

The Effect of Mid-Term Elections on Stocks

Zacks Investment Management has some useful things to say about how mid-term elections affect stocks.

Because midterm election years can mean a shift in the balance of power in Congress, it also means that there is an increased risk of one party enacting new laws and/or policies in the lead-up or once the power dynamic is set. Markets, in our view, do not like policy uncertainty.

This thought is supported by the figures they quote.

Going back to 1962, the average correction during a midterm election year was an eyebrow raising -19%.

AND

Since 1962, the average bounce for stocks following the midterm correction was a sturdy +31%.

Their approach to politics is that they are only interested to the extent that what the government does has an effect on investing by way of “property rights, corporate profits, and economic growth.”

If you believe these folks, you could lose money going into the mid-term election and win even more back afterwards.

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Could the Mid-Term Elections Cause You to Lose Money?

  1. 1. Could the Mid-Term Elections Cause You to Lose Money? By www.ProfitableInvestingTips.com
  2. 2. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money In just a couple of months the country will vote in the mid-term elections.
  3. 3. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money This is the election that falls between presidential elections.
  4. 4. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money On the Federal level, all seats in the US House of Representatives are up for election every two years and a third of US senate seats as well.
  5. 5. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money There is a tendency for the party that did well in the presidential election to lose seats in this “off year” election.
  6. 6. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money Because of the potential for a significant shift in political power on the Federal level, investors are wise to pay attention.
  7. 7. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money Could the mid-term elections cause you to lose money? Here are some thoughts on the subject.
  8. 8. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money The Effect of Mid-Term Elections on Stocks
  9. 9. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money Zacks Investment Management has some useful things to say about how mid-term elections affect stocks.
  10. 10. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money Because midterm election years can mean a shift in the balance of power in Congress, it also means that there is an increased risk of one party enacting new laws and/or policies in the lead-up or once the power dynamic is set.
  11. 11. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money Markets, in our view, do not like policy uncertainty.
  12. 12. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money This thought is supported by the figures they quote.
  13. 13. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money Going back to 1962, the average correction during a midterm election year was an eyebrow raising -19%.
  14. 14. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money AND Since 1962, the average bounce for stocks following the midterm correction was a sturdy +31%.
  15. 15. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money Their approach to politics is that they are only interested to the extent that what the government does has an effect on investing by way of “property rights, corporate profits, and economic growth.”
  16. 16. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money If you believe these folks, you could lose money going into the mid-term election and win even more back afterwards.
  17. 17. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money Many Factors Affect Your Investments
  18. 18. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money How well your investments do depends on how well you pick them.
  19. 19. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money We have repeatedly mentioned the concept of intrinsic value to use as a guide for long term investing in stocks, although the concept applies to any investment.
  20. 20. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money In order to accurately determine intrinsic value of an investment, you need to be able to predict the future.
  21. 21. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money That works better with a stable economy, no extreme changes in the laws affecting investments, and no major crisis that throws everything into an uproar.
  22. 22. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money Volatility in any factor makes investors nervous and tends to drive down stock prices.
  23. 23. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money This is why the market tends to sag in the months coming up to the mid-term elections.
  24. 24. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money How about This Year?
  25. 25. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money Could the mid-term elections cause you to lose money this year more so than in other mid-term election years?
  26. 26. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money The factors that concern us all revolve around the investigation into Russian meddling in the 2016 presidential election.
  27. 27. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money And, could things get worse instead of better after the election?
  28. 28. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money The main cause of low stock prices going into the mid-terms is uncertainty.
  29. 29. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money And, when the election is past, the uncertainty goes away.
  30. 30. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money Thus, stock prices fall and then they rise.
  31. 31. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money But, what happens this year if the Democrats reclaim both the US House of Representatives and the US Senate?
  32. 32. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money And, what happens if the investigation into Russian meddling in US elections finally implicates the sitting US President?
  33. 33. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money Clinton was impeached in the 1990s when the Republicans controlled the House of Representatives but the Democrats controlled the US Senate and Clinton remained in office.
  34. 34. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money Nixon was likely be impeached by the House and convicted by the US Senate and agreed to resign.
  35. 35. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money Our take on Donald Trump is that he would never give up even if there were damming evidence of his complicity in Russian meddling or in orchestrating a cover up.
  36. 36. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money The worst near-term case scenario for investors is that the Democrats take back the House and Senate.
  37. 37. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money Then the House votes to impeach Donald Trump.
  38. 38. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money The national anguish from such a drama played out on the talk show and news, repeated presidential tweets, and a high stakes game of chicken between the President and Congress would continue the uncertainty that investors hate and drive stocks down even further.
  39. 39. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money Pay attention as this drama plays out and maybe consider looking at our article about how to invest without losing any money.
  40. 40. http://profitableinvestingtips.com/stock-investing-tips/could-the-mid-term-elections-cause-you-to-lose-money For investors who like certainty, the potential upside to the worst case scenario is that Trump leaves office, the Tweet storms cease, we have a “ho hum” president in Pence, and four years of relative tranquility in Washington allow investors to plan, invest, and make profits.

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