Half of respondents in a survey released Thursday by E-Trade Financial said they expected U.S. midterm election results to have a positive effect on their investment portfolios, while a quarter thought it would have a negative effect.
Younger investors were particularly optimistic about the November vote, with 70% having a positive outlook, compared with just 34% of baby boomers.
Respondents were split on their views of the two major political parties. Fifty-one percent said the Republican Party would be more beneficial to their portfolios; 49% said the same of the Democratic Party.
Sixty-four percent of surveyed investors expected the market to rise this quarter, up 12 percentage points from the third-quarter survey results.
As for another interest rate hike, 63% of investors said the U.S. economy was healthy enough for one more hike in the fourth quarter, up 6 points from last quarter and 4 points from the 2017 fourth quarter.
“The midterm elections bring a lot of question marks to the table, but we’re seeing relatively positive and hopeful sentiment, particularly among young investors,” Mike Loewengart, vice president of investment strategy at E-Trade, said in a statement.
Loewengart noted that the election results could have a ripple effect on the economy, with trade, tax reform and government debt all subject to change. “While we’re on strong economic footing, we’re starting to see increased volatility, and there are some headwinds investors should be aware of, such as trade, inflation, housing weakness and ballooning government debt.”
Research Now conducted the online survey in early October among 956 self-directed active investors who manage at least $10,000 in an online brokerage account. The panel, 60/40 male/female, was broken into thirds: active investors, who trade more than once a week; swing investors, who trade less than once a week but more than once a month; and passive investors, who trade less than once a month.
The survey also asked respondents’ thoughts about sector opportunities in the fourth quarter. According to E-Trade, the results indicate retail investors may be taking a diversified approach ahead of the midterm election and its uncertain outcome.
Respondents exhibited a growth mindset, as they homed in on the technology sector’s strong performance, despite relatively high valuations. Forty-eight percent of investors said tech stocks offered the most potential this quarter.
On the other hand, investors also showed interest in health care, a more defensive sector, as the midterms approach. This quarter, 44% of investors were drawn to health care investments.
They may also see opportunity in the demand for oil, strong global growth and supply constraints that could keep the price of natural gas and crude oil high. The survey found that 42% of respondents would choose energy in their portfolio, keeping it among the top three preferred sectors this quarter.
— Check out Valliere: ‘Red-Hot’ Economy Is Big Risk; Trump Is Favorite for 2020 on ThinkAdvisor.