With the 2018 midterm elections on Nov. 6, a look back at how markets have performed after midterm elections show little relationship between the two. The markets a Congress inherits is more determinate of future performance than the party in control. While politics doesn't directly dictate market movements, policies set in place, such as those related to taxes and trade, can influence investor sentiment.
Yields neutral: The 10-year Treasury yield has shown little deference to congressional control, rising and falling with market cycles until the lower-for-longer years broke down the relationship.
No sector bias: Likewise, sector performance has also followed market cycles; however, the only two periods where all sectors were in the black were during GOP-held congresses.
Earnings GOP: GOP-led Congresses have also shown to be friendlier to corporate earnings. Democrats controlled Congress during recessions in both the early 1990s and 2008.
