 | ||||
| ||||
Midterm elections have historically marked bullish pivot points for the stock market no matter the outcome, while the runups often represent the worst stretches of any given four-year presidential term. This backdrop could help many investors start to turn big profits again after what's been a rough year so far. The historic strength that follows midterms doesn't require investors to get too complicated. What is necessary is the ability to take a giant step back and find areas of the market and stocks that will benefit from large-scale trends that are difficult to bet against. Mandatory government spending, tax incentives, and sweeping socioeconomic and demographic patterns must be capitalized on. With bullish midterm election history on your side, right now appears to be a great time to start investing in stock market segments that offer nearly surefire long-term growth runaway. Market Rebound Ahead? History Says So The market certainly suffered a massive downturn during the first three quarters of 2022, driven by a multitude of compounding factors we are all too familiar with. Luckily, positivity is starting to peek through the clouds of uncertainty, with the S&P 500 rebounding through the early weeks of the third-quarter earnings season. History is on the side of the bulls as we enter the midterms, considering that the S&P 500 has climbed during the year period following every midterm election since 1942, averaging a 15% return. These long-term trends favor investors willing to buy stocks right now, especially if they know where to look. No Party Affiliation Required There's no need for investors to rack their brains to come up with precise investment strategies for every possible mid-term election scenario. And there isn't one outcome that must be achieved or avoided either. Washington is likely headed for gridlock, which Wall Street doesn't mind at all. Gridlock is something investors and the market are very familiar with since Washington has been divided roughly 70% of the time, dating back to 1981. The broader market also doesn't favor either party in particular over longer time frames. For instance, the average annual stock market returns during the Trump and Obama administrations—which included periods of unified and divided governments—were almost exactly the same at roughly 16%. Wall Street is unemotional and apolitical. The average retail investor should be as well. | ||||
| ||||
| Government Spending Provides a Sturdy Backbone The odds appear to favor a divided Washington, likely creating more gridlock and less spending. But the real point of the midterms is to provide clarity and help investors determine what Congress seems likely to accomplish and what it's not. Lingering 40-year high inflation makes the prospect of hefty additional spending after the midterms potentially undesirable no matter what Congress looks like. Thankfully, investors don't really need to predict what's next for a variety of reasons. First off, the U.S. Government already passed rather significant spending measures during the first two years of the Biden administration that investors can capitalize on as money and tax incentives are really just starting to flow. The big spending efforts include a wide-ranging $1 trillion bipartisan infrastructure package, a $280 billion bipartisan The Chips and Science Act, and most recently, the so-called Inflation Reduction Act. These three spending packages highlight industries that investors should consider adding exposure to. Alongside picking the strongest stocks from certain areas the government hopes to spur growth in directly, savvy investors should look to sectors of the economy that are captured by mandatory government spending every year. The best of these areas should also be boosted by demographic and societal trends that are difficult to reverse. Foundational Industries with Long-Term Momentum The trillions of dollars of new government spending efforts that were kickstarted during the first two years of the Biden administration provide solid investment guidelines. Billions will pour into fading roads and bridges, as well as the electrical grid, EV charging stations, and other alternative energy efforts. The most recent bill also focuses heavily on encouraging alternative energy sector expansion in wind, solar, nuclear, clean hydrogen, carbon capture, and beyond. Current government incentives are fueling private spending and Wall Street investment to help create a virtuous cycle that's poised to permanently alter the energy industry. The EIA projects that renewable's share of the electricity generation mix will double by 2050, from 20% to over 40%. Beyond energy, the U.S. is heavily focused on onshoring semiconductor manufacturing, as it grows increasingly more confrontational with China and fearful Taiwan's autonomy will diminish. The Trump administration, and now the Biden White House, are focused heavily on boosting chip production in the U.S. because they know semiconductors are the bedrock of technology and the entire global economy. Despite their size and impact, these bills will make up a tiny fraction of government spending in the coming years and decades. With this in mind, shrewd investors should also focus on mandatory aspects of the Federal budget that point to wider demographic and societal trends. For instance, the fiscal 2021 budget included $1.2 trillion in spending for Medicare and Medicaid. On top of that, the U.S. is getting older fast, which will likely facilitate even more spending on healthcare from the private sector and Washington in an already relatively unhealthy nation. Bottom Line Washington's political stances, spending patterns, tax incentives, and other initiatives can help act as a guiding light that investors can take advantage of during what could be a significant comeback if midterm election history proves any useful guide. Healthcare, energy, semiconductors, and some other pockets of the stock market that the government will continue spurring might be considered bedrocks of a diversified long-term portfolio. Zacks has released a brand-new special report to help you capitalize on this historically bullish opportunity. Midterm Election Profits: 5 Stocks Set to Soar reveals the companies poised to benefit most from the post-midterm money flow. All 5 have forecast higher earnings despite the economic downturn. They see promising developments on the horizon. We expect them to jump more than others in the weeks and months ahead, and we encourage you to scoop up your shares now. To maximize your profit potential, you'll want to grab them before shares start to climb. Zacks has published similar reports before each election since 2012, and the results have been outstanding. Our recommendations have given readers a shot at gains up to +67%, +83%, even +185% in the months after the election.¹ These midterms could be just as lucrative. Our midterm report is only available until Sunday, November 6 – but you can access it today and be among the first to see our top election picks. Click here to claim your copy of Midterm Election Profits: 5 Stocks Set to Soar » Wishing You the Best on Your Investing Journey,
Ben Rains is a Stock Strategist focusing on large-cap technology companies, consumer-facing stocks, and beyond. He also manages the Zacks Marijuana Innovators service, developing strategies that enable investors to profit from the growing legal market around the world. | ||||
 | ||||
| ¹ The results listed above are not (or may not be) representative of the performance of all selections made by Zacks Investment Research's newsletter editors and may represent the partial close of a position. This free resource is being sent by Zacks.com. We look for investment resources and inform you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms of Service". https://www.zacks.com/terms_of_service Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research is not a licensed securities dealer, broker or US investment adviser or investment bank. The Zacks #1 Rank Performance covers the period beginning on January 1, 1988 through September 12, 2022. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank #1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance_disclosure for information about the performance numbers displayed above. Zacks Emails Zacks Investment Research |
Post a Comment
Post a Comment