What a Democrat Sweep Means for Markets

What a Democrat Sweep Means for Markets

January 06, 2021

It's looking like democrats are on their way to holding a small majority in both houses of congress as well as the White House.  I've received a lot of questions about what this means for markets because there has been a lot of noise about this issue and a lot of fear tactics used to mislead people. So let's set the record straight with the facts....

The fact is the stock market doesn't care nearly as much as politicians or the media covering politics want us to believe.  At the end of the day, stock prices are driven mostly by corporate revenues or the prospect of future revenues and those revenues are driven mostly by consumer spending.  While you may have positive or negative emotions about the elections, I highly doubt that many of us are going to dramatically change the way we consume goods and services because someone we don't agree with is now a Congressman/woman or President.  

Are you going to spend less on Amazon? Probably not.  Are you going to get rid of your iPhone?  Probably not.  Are you going to go online less?  Probably not.  Are you going to buy fewer groceries?  Unless you're on a diet for your New Years resolution, probably not.  I can go on and on....Our spending habits historically haven't changed much if any based on political outcomes.  

Will there be winners and losers?  Absolutely.  There always are.  There are likely to be certain sectors that perform better or worse based on certain outcomes and our job will be to identify those trends and do our best to capitalize on them.  

As for the market overall, please look at the attached chart to see what a Democratic "sweep" has meant in the past.  As you'll see, the market was higher nearly 80% of the time when Democrats held both houses of congress as well as the White House.  The average return during those previous occurrences has been 9.1%.  The last two times this happened the market returned 23.5% & 12.8%.  Those are the facts.

Ignore the noise.  Stay patient and committed.  As always, contact us if you have any questions!



The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.