The US midterms will be a referendum on Donald Trump’s presidency.
Investor anxiety that one or both houses of Congress will flip to Democratic control in next week’s midterm election is thought to have added to one of the US stock market’s worst Octobers in years.
The brutal month reversed some of its losses in its final two days when a cluster of strong earnings led by Facebook and General Motors appeared to rescue the market from a steeper decline, particularly in technology shares.
Still it was ugly. The tech-heavy Nasdaq Composite on Wednesday was down about 9 per cent for the month. The Dow Jones industrial average was about 5 per cent in the red, and the Standard & Poor’s 500-stock index was about 7 per cent negative.
Many investors were fixated on what Royce Funds portfolio manager Bill Hench called “the most over-analysed midterm election in our history”. And that may really be saying something.
* Coin-toss race in Nevada that could decide fate of US Senate
* Two women head right in nasty but crucial Arizona Senate race
* Rich moderates in California’s Orange County consider swinging left
A brutal October reversed some of its losses in its final two days.
Sam Stovall, chief of US equity strategy at CFRA, published an analysis that showed midterm election years make for dicey days in the financial markets.
“The second and third quarters of the midterm election year traditionally were the most challenging of the entire 16-quarter presidential cycle,” Stovall said in a report examining post World War II midterm elections. “The reason boils down to one word: uncertainty.”
Historically, the party controlling the White House has lost an average of 22 seats in the House after the midterm election and four seats in the Senate.
“With this kind