The mid-term elections have come and gone. As investors, we now have to digest what has changed and make adjustments to our portfolios, if necessary, to help achieve our financial goals.
The biggest change is that the Democrats have taken control of the House of Representatives while the Republicans have retained power in the Senate. This was considered the most likely outcome so no surprises here. What this shift means is that Trump will now have a tougher time pushing his agenda through Capitol Hill, like building a wall, more tax cuts, etc. For the markets, it means that not much will get done in DC (not a shocker) so that is one less risk that investors have to worry about.
However, there is a lot more impeachment chatter going on now that the Dems will have the house in 2019. This, I believe, would hurt stocks and help bonds, but there is such a small chance of this happening. Even if the House did impeach Trump, that is only the first step. To remove a president, there has to be a trial and then a vote in the Senate, where ⅔ have to approve for removal. There’s no way that will happen, unless Mueller turns up some bad stuff on Trump.
Some good that may come from a split Congress is that there are some agenda items that both parties can agree on, the most pressing being the country’s crumbling infrastructure. I was disappointed that nothing was done on this when Republicans controlled everything these past 2 years. I do still hold out some hope that with new blood on the Hill, they can make something happen because it will help both parties, but more importantly, it will help America and its people (which should always be the goal). This would certainly give the markets a boost.
The infrastructure deal would be big but will take some time for everyone to agree on it. A quick way to boost the markets is for us to get some trade deals done with the rest of the world, especially China. I agree that we needed to rework these trade agreements but we’re going about it the wrong way, in my opinion. We’re taking a one winner-one loser mindset into these trade negotiations versus trying to make it a win-win for both parties. I believe we can get something done prior to the end of the year and help prevent further layoffs and plant shutdowns from occurring, particularly in the automotive and farming industries.
Seasonally, this is usually the best time of the year to invest. If our Congress can roll up their sleeves and work together, they can certainly help continue this trend.
Joe Baker, CFP®
Baker Asset Management, LLC
joebaker@bakerassetmanagement.com
