Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards
Peter Mallouk

Portfolio > Economy & Markets > Stocks

Peter Mallouk: Why Politicians Don’t Matter Much to Markets

Your article was successfully shared with the contacts you provided.

Investors wondering how the upcoming midterm elections will affect stocks should know that politicians don’t matter as much to financial markets as people often think, according to Creative Planning CEO Peter Mallouk.

“Do politicians impact the stock market? Yes, but not nearly as much as most assume,” the financial advisor tweeted Monday night. “This election will likely have less influence on the financial markets than many would expect.”

Mallouk offered three reasons why politicians’ influence on markets is limited.

  1. “The stock market is always pricing in expected future earnings, which trend up regardless of which part is in power. The historical return differential between Republican and Democratic administrations has been virtually nonexistence,” he wrote.
  2. “Markets generally favor a division of power,” Mallouk continued, explaining that a divided government can cause political gridlock, which means less change and uncertainty. Markets have mostly gone up no matter which party is in power, however, even if one has total control, he added.
  3. “Market volatility leading up to midterm elections typically smooths out,” he noted, adding that the market historically enjoys above-average returns after midterms are finished.

“The U.S. stock market has been positive in every year following a midterm election since WWII,” Mallouk tweeted. “That certainly doesn’t mean it will happen again this time, but the market will likely find its way regardless of the election outcome.”


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.