Market Extra: What’s next for the stock market as midterm election results roll in

by | Nov 8, 2022 | Stock Market

Many investors are talking about the potential for Tuesday’s midterm congressional elections to spark a stock-market bounce, arguing that the potential for a divided government if Republicans take control of one or both chambers would be positive news. According to one market watcher, the bounce is already under way.

“At its recent high, the S&P 500 was already up about 9% off of its mid-October low, exceeding the typical bounce of about 7%. We believe the October move was fueled in large part by the shift in momentum away from Democrats and back towards Republicans that we started to see in polling data and betting markets that was building in August and September,” said Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, in a Monday note. If so, the bounce, which comes after the bear market for equities took the S&P 500
SPX,
+0.56%
to its lowest close in nearly two years, is in keeping with market history that shows equities tend to see their best post-election performance in split-government scenarios, particularly when a Democratic president is paired with a congress in which either the House or Senate or both are controlled by Republicans (see chart below).

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