The stock market may be staring down a continued rally following last month’s bear market—following today’s election.
Key Details
- Analysts are bullishly predicting stock market improvement following today’s midterm elections.
- Morgan Stanley strategist Michael Wilson previously predicted slumps in the equities market this year and now he is predicting a rally.
- Wilson wrote on Monday addressing the likelihood of a GOP victory, saying that he predicts improvement in equity markets.
- A Republican Congressional victory would likely result in lower bond yields, lower fiscal spending, reduced budget deficits, and higher equity prices, Wilson reports. This would keep the ongoing market rally going into the near future.
Why it’s Important
This would be good news for the stock market, which has experienced a tumultuous year of highs and lows. Following the Fed’s interest rate hike in September, the stock market collapsed to a four-month low.
The month of October though proved to be an important bear market for Wall Street with a major 13.96% month-to-month gain, one of the largest in stock market history.
“JPMorgan Chase & Co. strategists also have a bullish outlook on stocks against the backdrop of a potential peaking in bond yields, ‘very downbeat”’ sentiment and positioning, and good seasonal factors, they wrote in a note on Monday,” says Bloomberg.
Much remains to be seen though about the state of the economy, with outstanding reports on the consumer price index and other key economic indicators. It also remains unclear exactly what Congress is going to look like in January and how much power the lame-ducks will have to influence policy until then.
“This week is also significant for markets as a U.S. consumer-price index reading on Thursday will show if Federal Reserve rate hikes are cooling inflation. The central bank increased rates by 75 basis points for a fourth time in a row last week and Chair Jerome Powell said the cost of borrowing will be higher than previously expected. That put a spanner in the works of the recent rally, with the S&P 500 Index posting its worst week since September,” says Bloomberg.
