Mid-Term Elections In The United States Bring "Surprises" To The Stock Market.

The Republican Party, which is likely to take the Senate, has always given a strong impression, and has obstructed the bill for a long time. However, due to changes in American politics in recent years, the Republican Party will become more tender in the future, which may also bring "surprises" to the stock market.

　　 Mid term elections are good for the stock market?

The mid-term elections are good for the stock market? Let's look at a set of data: the 6 months after the 16 mid term elections after 1905, the return of the US stock market after 12 months and 18 months is positive. Only 12 months after 2008, the negative return is due to the crisis, so the mid-term election is a buying opportunity.

Why does this happen? This involves the impact of the political cycle on the economic cycle. Generally speaking, the president of the first term of office will start implementing some election promises when he takes office, and many administrative measures will change the market interest pattern. This uncertainty is not necessarily good for stock market, but in the next two years, because of the need for a second term of office, finance and economic policy It will ease a lot.

Then, like the end of the second term of Obama, first of all, he needs to pave the way for the next presidential candidate of the party. Secondly, if this Congress is occupied by the Republican Party and the White House is his own, it is usually called "Lameduck session".

In contrast, the stock market is generally good, because investors in the US are in fact very opposed to government intervention, so no big change is to reduce the risk of policy.

Here is a digression. The United States is a small government big market. In addition to the economic crisis, the more the government does not intervene, the better the stock market. China is a big government and small market. The more policy intervention the government has, the more market the stock market has, the more typical market it is.

　　 The Democratic Party or the losing Senate

As for the mid-term elections, the information we have contacted shows that although there are 33 seats in the 100 senators seats in this Senate, in fact, the seats in the relatively stable seats are 45 to 44 for the Democratic Party, 7 to 4 for the remaining 11 seats, that is, if the final result of the latest polls is likely to be 52 to 48, the Republican Party will be re elected to the Senate.

Why is the Democratic Party losing? The main reason is that Obama's commitment in the second term of office is basically nothing, and polls are low to 33%. For example, immigration policy is one of the main reform directions of Obama. At present, Obama has made some amendments to some visa policies through administrative decree, but has not passed the Congress, and has done nothing to solve the problem of amnesty for illegal immigrants, which many people care about.

This is in Mid-term elections There are obvious experiences. For example, Colorado, about 20% of Hispanics, are all the votes of the Democratic Party. Now the Democratic Party's public opinion polls dropped to 39%vs46% last week. The reason is that Hispanics are not fully satisfied with Obama's immigration policy reform, so they may simply stay at home without voting.

　　 Republicans can be more gentle.

The pessimism of the Democratic Party also reflects the rising trend of the Republican Party. In recent years, there is a phenomenon in American politics that both conservatives and liberals are moving closer to the middle. Before the Tea Party (tea party), the most powerful conservative party in the Republican Party, is expected to lose significantly in this mid-term election. The members of the US House of representatives are from the state constituency. Generally speaking, many constituency voters are concentrated in the community and the storehouses are more stable. The extreme conservatives such as the tea party who oppose big government and government intervention will maintain a stable seat in the house of Representatives, but in the national Senate election, they can not return to the political center. This will be the most important change in American politics.

And this is indeed a good thing. equity market Changes. Looking back at the government's short door closing problem caused by the debt ceiling in 2013, the Republicans basically killed eight hundred of the enemy themselves and one thousand of the boycott party, which meant that the tea party's boycott was very dissatisfied with the political deadlock caused by the Republican Party. Therefore, once the Republican Party recaptured the Congress, the Republican rate would not be as aggressive as before, and it would not block the reform of Obama's health care policy, which in itself meant a drop in political risk.

But the change in the political structure generated by the mid-term elections in 2014 may be far more than the market expected. We believe that there may be a corporate tax reform in 2015, and the direction of reform should be tax reduction, expenditure reduction, tax increase and tax reduction for small businesses. There is also the Dodd Frank bill reform, TPP (trans Pacific Partnership Agreement), energy policy reform and so on, which may take place in the next two years.