by: Nick Maresco
SUMMARY: We’re gonna give it to you short here and tell you what would likely happen if the Democrats took Congress during the upcoming midterm elections.
- Divided government
- Growth/gains of stock decrease
- Economic slowdown
- Same if not increased volatility
- A much more cautionary market
- Taking control of the House
- Pushing heavily to re-instill and fund progressive leaning programs including Obama-care, welfare, equal pay for women, and environmental issues.
- This would create a much more divisive government, with more progressive and liberal leaning bills being passed.
For all of the ecstatic readers out there…
First off, a Democratic Congress would result in a more divided government. And now, you’re probably wondering, “aren’t we already in a divided government?” The answer is yes, by viewpoints. Democrats taking Congress would give them more standing power, more legitimate power, and a way to thwart many contradicting viewpoints. The imposition of their bills would be much more realistic, instead of being on the defense, always having to reject the opposing sides wants. Obviously, without taking Congress the Democrats still have power, but the power they have make them a better “conservative deterrent” than a party that can actually get their bills passed.
What does this divided government mean for the economy?
Welp, according to MarketWatch. It means many things. Overall, in an undivided government, small stocks see an annual gain of 13.1% percent. While in a divided government, things slow down a little bit, and small stocks see an annual gain of 9.5%. And this is not just a change that affects small stocks. Overall, in this period of divided government, the amount of growth and gain our economy faces, is cut in half. As I said, it doesn’t only affect small stocks. To quote MarketWatch, “Large-cap equities, as measured by the S&P 500, stocks see annualized gains of 10.8% in periods of a divided government, compared with gains of 16.4% during united governments.” Not all is bad though, during periods of divided government aggregate bonds do better than periods of united government. Showing an annual growth of 8.8% percent, compared to 3.6% percent when the government is divided. This downsize in growth could very well result in an economic slowdown, sort of speak.
Now onto policy. If Democrats took Congress, the big three things they would be focusing on are as listed, good job availability, equality towards pay for women, and economy. Compared to the Republicans big three. Economy, conflict in the middle east, and good job availability. Democrats would enter Congress with a much more progressive view in mind, increasing the taxes on the rich, reinstilling Obama-“care”, and backing federal relief programs, including welfare. You can expect our country to go from the once, “overwhelmingly” conservative state (right after the November 2016 election), to a more leveled out divisive government with much more progressive views being put into action.
What’s the likelihood that the Democrats take Congress. Hmm (there’s an excellent chance).
According to MarketWatch, there’s a 60% chance. Some sources are speculating 70-75% chance. According to NBC, Democrats hold a 12 percentage point advantage over Republicans. The Washington Examiner stated, “Fifty-two percent of registered voters said they preferred Democrats to be in control of Congress, while 40 percent want Republicans to remain in charge.”
Overall, the reality of a “blue wave”, swarming Congress this year is very well possible.
Photo Credit: Mother Jones & The Duran