Many of us watched the presidential debate last week. Some may say that this election is the most important election we’ve had in quite some time. Maybe it is, and maybe it is not. I don’t really have the answer.
A contested election is the greatest threat to the markets. Unfortunately, both parties will contest the election if it is close, so let’s hope it’s a blowout for either candidate. Once the winner is announced and accepted, the market will be back to normal. The chart below shows that only President Hoover (1929-1933), President Nixon (1969-1974), and President Bush (2001-2009) have had negative stock market returns.
Generally speaking, I’m uncomfortable when the same party controls the president, senate, and congress. It’s evident that both parties like to spend both our tax dollars and borrowed dollars. I don’t feel either party is fiscally conservative anymore. When one party has too much control, they can become a little more aggressive pursuing their agenda and push bills through quickly. Since 1933, the S&P 500 has performed the best when congress is split at 10.4%. A unified government has the second highest performance at 10% followed by a unified Congress with a president in the other party at 7.4%. See tables below from Capital Group.
Senate Seats Up for Grabs
The Senate is currently split at 47 Democrats and 53 Republicans. There are 35 Senate seats up for grabs in 2020. Many of those seats are entrenched and will most likely not change hands. If the Democrats win the presidency, they only need to win three seats to take over the Senate. The Vice President is the tie breaking vote. If Donald Trump is re-elected, the democrats would need to win 4 seats. Below are the key races to watch.
ETF of the Week: iShares Core Small-Cap IJR
iShares Core Small Capitalized ETF (IJR)was the best performing ETF last week. IJR invests in companies with a market capitalization of $600 million to $2.4 billion.