Few things divide our nation as much as our politics. And when elections roll around, politicians trip over themselves promising the sun, moon, and stars.
If you listen to campaign ads, you’d imagine every election is "the most important in history." And the results will lead to sweeping changes.
We know by now that kind of rhetoric is overblown. But every election season, people wonder what the results will mean for their portfolios. Will a certain candidate or party’s victory crush some industries and send others soaring to the heavens?
At Intelligent Income Daily, we want to equip you with the best strategies to safeguard your portfolio. Regardless of your political preferences, our goal is to help you protect and grow your wealth no matter the election results.
So today, I’ll share data from one of my top analysts, Adam Galas, to illustrate what you need to know about the 2022 midterm elections… and what it’s likely to mean for your portfolio.
What the 2022 Midterm Elections Could Look Like
If you’re wondering how the political landscape will shake out after elections, Adam has two sources he looks at: Race to the White House and 538.
They run daily simulation models based on the most reputable polls. And since 2004 and 2008, respectively, they’ve had the most accurate track record. Here’s Adam with more…
These two sources have historically come within a few percentage points of the final results and are regarded as the gold standard in U.S. election forecasts. For the 2022 midterm, here’s what 538 estimates:
55% chance the Democrats retain the Senate (most likely outcome 50 Democratic seats, the same as now)
81% chance the GOP wins the House (the most likely outcome is that GOP picks up 16 seats and ends up with a 13-seat majority)
Race to the White House estimates:
60% chance the Democrats hold the Senate (most likely outcome of 50 or 51 Democratic seats)
64% chance the GOP wins the House (most likely outcome is GOP picks up 11 seats for an 8-seat majority)
Historically, the party in power loses seats in the midterms. That leads to a divided government, giving neither party an easy path to getting legislation passed. And based on current estimates, it looks like we’ll likely flip to a divided government come January 2023.
Wall Street loves gridlock. It means the status quo continues, and companies have a much easier time planning around nothing big changing.
But of course, nothing is guaranteed. That’s why to protect our portfolios, we need to focus on the bigger picture rather than hitching our carts to one outcome.
What It Means for Your Portfolio
Politics is all about narratives, and popular investing “trends” are, too. It’s easy to fall into the trap of "can’t miss" political investing ideas.
Adam shared a recollection of these previous investing themes around politics that seemed all but assured.
History is clear that following “sure thing” election-based investments tends to be far riskier than the popular narrative makes out. In the past, conventional investing themes had people believing:
Obama winning would be great for green energy. (Green energy stocks fell 90% during his administration.)
Obamacare would kill private health insurance. (Insurance companies rallied 10X over the 10 years after the Affordable Care Act passed.)
Trump winning would be wonderful for infrastructure stocks and energy. (Energy got crushed, and no infrastructure bill was passed.)
Biden winning will be terrible for energy stocks. (They have become the best-performing sector since his election, but due to factors that have nothing to do with politics.)
In hindsight, basing your investment strategy on these assumptions would have been disastrous for your portfolio.
The soundbites you hear on the mainstream news about how "stock X and Y, are the best stocks to buy if candidate Z wins" are usually too simplistic and rarely work out.
Why? Because the world is more complex than politicians admit.
And when it comes to how it impacts the stock market… Letting our politics skew our market outlook is almost always a mistake.
So what’s the bottom line for your portfolio and the midterm? Here’s Adam again:
According to State Street, since 1950, the average 12-month post-midterm market rally is 16%.
How often have stocks posted gains within 12 months of the midterms? Over the last 18 times, 100%.
This is because the market hates uncertainty most of all. And after the results are announced, uncertainty fades.
So regardless of how you cast your vote on November 8th, don’t make drastic changes to your portfolio or sell out of fear. No matter the outcome, we should see a boost in the market when the dust settles.
As long as you have a diversified portfolio of blue-chip stocks, your portfolio should survive the uncertainty now… and rise to higher levels in the coming years.
Happy SWAN (sleep well at night) investing,
Brad Thomas
Editor, Intelligent Income Daily
P.S. My favorite companies to own right now are a specific type of blue-chip stocks. They’ve been around for all kinds of political environments. And they’ve produced reliable and increasing income for shareholders through it all.
To access my list of the best income-paying blue-chip investments to boost your portfolio leading up to the election, click here.