So many investors are asking, “If the Democrats take back the House after the midterm elections, what’s going to happen to the markets and the economy?” Although I had to return my crystal ball to the store (because its past accuracy has been sketchy at best), I’d still like to offer my opinion. So, here are my guesses:
First Guess – I think the Democrats have a very good chance of taking back the House for two reasons. First, there are over 30 Republican congresspeople retiring, which takes away the incumbent factor. Second (and this is totally, 100 percent my own opinion), I think that female Democratic voters age 21-45 are going to show up at the polls in droves to ensure that their voices are heard, and that a repeat of the 2016 election doesn’t happen. I think this demographic could run this election. Historically, midterm elections are boring and hardly anyone shows up to vote, when compared to general or presidential elections. This one could be very different.
Second Guess – I think the economy is moving along at a very fast pace and this is going to continue through the end of the year, no matter who is in charge of Congress.
Third Guess – If the House goes back to the Democrats, Trump could view this as an opportunity to become the most effective president in history.
Please, follow me down this rabbit hole … Trump has used the Republicans for about all they were good for – corporate tax reform. He tried healthcare reform and had no success, so he knew he had to get something done with the current Congress. President Trump has already announced that he wants to do an even bigger and better infrastructure spending bill than President Obama wanted to do – a spending bill that the Republicans are by no means going to allow him to pass. He wants this infrastructure spending bill, because he knows it will continue to goose the economy and spur even more hiring. I believe President Trump could very well run the entire Obama Playbook with a Democrat-run Congress. I could easily see him attempting to negotiate with Democrats for his massive infrastructure spending bill, by giving them the ultimate in Democratic desires. He may be willing to give them universal health care, immigration reform and common-sense gun control, in return for his infrastructure spending bill (which, of course, includes his wall).
So, to answer the question “What’s going to happen after the midterms?” I think the economy will continue going great; but, next year is going to be a year of massive volatility. Spending may start to slow after the initial spending frenzy due to corporate tax reform. Once President Trump completely turns on his party’s policies and starts working with the new Democratic House, the economy could pick up again and we could see “1990s-like” economic growth during the 2019-2025 time frame. This could be one huge economic party if it plays out at all like I think it could. Bottom line: Stay diversified and stay invested. It’s going to be a bumpy ride! Remember, tough markets don’t last – tough investors do.
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