The following is an excerpt from Patti Domm | October 18, 2016 | Thefiscaltimes.com |
The stock market is betting on an election outcome that could mean political inertia and more gains ahead.
If the stock market doesn't get its favorite election outcome this year, it may get its second best and that would be a scenario where no party holds Congress and the White House.
BMO Private Bank CIO Jack Ablin said the betting market is giving high odds to a Clinton win but also a Democratic Senate — the second best scenario for stocks. While that would be a Democratic president and a Democratic Senate, the odds on PredictIt.org and other sites favor the Republicans retaining control of the House of Representatives. That would be a recipe for more gridlock in Washington, which the stock market typically likes.
"Going back to 1900, the Dow tends to perform better under Democratic presidents, outpacing their Republican rivals 8.4 percent to 6.1 percent average annual price return. The Republicans have an investment edge in the Senate, however, outperforming the Democrats 8.1 percent to 6.5 percent. Of the four combinations of President and Senate, a Democratically-controlled White House matched up against a Republican Senate yields an 11.2 percent average annual return," Ablin said in a note. "If PredictIt is right, we're setting up for the second best investment scenario with an average annual return of 7.5 percent historically."
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