What investors can expect after the midterms

Election workers open mail in ballots at the Maricopa County Tabulation and Election Center in Phoenix on November 11, 2022.

Justin Sullivan | Getty Images

It takes until December to know which political party control both chambers of Congress after Tuesday’s midterm elections.

But that doesn’t mean your personal investment strategy has to remain up in the air either.

As uncertainty in the results of several key races looms, the future results will not lead to a big market reaction, according to Dan Egan, vice president of behavioral finance and investment at Betterment.

“We still effectively have a balanced government, which is actually something that is common in the market,” Egan said.

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In the notes on the midterms published this week, UBS also signaled the result could be positive for the market.

“Regardless of the final outcome, we see a divided government, which increases the chance of gridlock and limits legislative action,” wrote Solita Marcelli, Chief Investment Officer of the Americas at UBS Global Wealth Management.

“This is usually good for the market because it reduces policy and regulatory risk,” he said.

Watch out for political bias in investing

UBS: The US interim results are unlikely to have a material impact on our economic outlook

Yet many investors tend to suffer from biases that the other team or the winning party is bad, according to Egan.

“The more partisan an individual is, the more likely they are to say if you’re a Democrat or a Republican, ‘Well, the stock market is going to be bad because the economy is going to be bad,'” Egan said.

That could lead those same investors to reduce the amount of risk they take, regardless of whether there is a real reason to do so, he said.

Remember how little control a set of politicians has over the stock market or the economy in general.

Dan Egan

vice president of behavioral finance and investing at Betterment

To combat that reaction, it can help to share.

“Remember how little control a set of politicians has over the stock market or the economy in general,” Egan said.

What’s more, if you take investment risk off the table in response to earnings, you may miss out on market upside.

The S&P 500 Index tends to beat the overall market in the 12 months after the midterm elections, with an average return of 16.3%, according to a US Bank Analysis.

Looking ahead to the 2024 election

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