Financial markets can take good news and bad news in stride – the key to stability is avoiding surprises. As the ballots are counted from the midterm elections, another potential surprise finds itself in the review mirror. The likelihood of mixed government is increasing, and historically that has provided a positive momentum long term for investments. Our partners at LPL have released their commentary on how mixed governments affect markets.
Since the attached article was published, Arizona and Nevada’s elections have been called. Historically a divided government has been seen as a positive by providing checks and balances of power, reducing the likelihood of extreme policies being passed, and creating legislation that requires bi-partisan compromise. Similarly, uncertainty that impacts corporate and household spending plans eases as the likelihood of significant changes to spending, taxations, and regulatory policies ebbs.