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Monday, November 1, 2010

Who's Better for the Market? Republican? Democrat? Or Gridlock

The midterm election is around the corner and investors including myself are kind of in wait and see mode as the result of election will determine which direction market will go.  Conventional wisdom says either a Republican controlled government or a Gridlock are good for the market as Republican generally geared towards more government-offhand-business policies while Gridlock - where the U.S. Senate, U.S. House of Representatives, and White House are not all controlled by the same party - is even better as the businesses will find way to grow by themselves with a stagnant government.


So what does realty tells?  According to the stats compiled by Fidelity.com in September, the average one year return for Large Cap stocks post midterm election are: 23.3% for Gridlock, 24.4% for Democratic controlled government, and 20.8% for  Republican controlled government which makes the average one year return post midterm election yields about 23.4%.  The average annual return in other years?  Still a decent 11% yet only less than half of the gain for post midterm election.  


So what does that mean for the investors?  Do not worry about the result.  Just Buy.

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