Investing in Era of Democrat Rule

Prognosticators assessing this week’s Democratic sweep of two U.S. Senate seats in Georgia had suggested that control of Congress and the White House will bring significant changes in tax policy (not good if you’re a high-income earner) and energy policy (very good if you own or invest in a green company) and consumer spending (good if you’re a retailer and customers have $2,000 in new COVID-19 relief checks).

But what will it mean for the banking sector, and for wealth management in general? On the day after it appeared the Democrats had taken both Georgia seats–and with them, effective control of the Senate–the Dow Jones Industrial Average tacked on nearly 500 points to close above 30,800. It marched ahead even further on Wednesday and Thursday, surpassing 31,000 for the first time.

Financial-services executives say that after a change in control of Congress, investors can historically could count on a market pullback of roughly 10 percent as the next round of taxes and regulations came to fruition. But a federally-funded shopping spree in the form of more pandemic relief is likely to keep the markets afloat for the time being, they say.

According to an article in Forbes, the U.S. has seen six instances since 1944 when a new Democratic president came to office with his party controlling Congress, and the average S&P 500 return for those years was 10.3 percent. Only Jimmy Carter’s first year failed to produce gains. You can read the Forbes piece here.