To The Moon

1. Historical data shows mid-term elections result tend to favor short-term U.S. stock market trends

$S&P 500(.SPX)$ ,$NASDAQ(.IXIC)$ ,$DJIA(.DJI)$

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For more than 70 years, the U.S. Mid-term elections have been a major positive for the stock market: Historically, the fourth quarter and the year following the midterm elections are the strongest periods for the stock market during the four-year term of a president.

According to Carson Investment Research, the fourth and subsequent quarters of a midterm election year are the strongest in history, with the $S&P 500(.SPX)$ gaining an average of 6.6%, 7.4% and 4.8%.

According to data compiled by Bespoke Investment Group: Since World War II, the third year of the presidential cycle is by far the strongest .

UBS found through statistics of 18 mid-term elections after 1950 that the $S&P 500(.SPX)$ rose by an average of 14.5% from August of the mid-term election year to March of the next year, with a median of 16.4%.

Therefore, U.S. stocks generally usher in a wave of gains after the mid-term elections. The logic behind it is that American politicians usually formulate more accommodative policies in order to be elected, and cash in after they are elected.

2.How will the midterm elections affect  the U.S. Treasuries，the U.S. dollar  and gold?

Tuesday's midterm elections could give Republicans control of Congress, undermining the administration of Democratic President Joe Biden.

Markets now expect U.S. Treasuries to rise if Republicans win control of the House and Senate. But if Democrats keep the House and Senate, the dollar will extend its gains.

Analysts said a division of Congress could lead to an impasse over raising the federal debt ceiling, potentially reviving fears of a U.S. default, a situation that could spur safe-haven buying in Treasuries.

“The political gridlock could be good for bonds (bear for U.S. yields, bull for gold) if there’s no need to worry about one party passing massive stimulus,” said Raymond James’ Phifer.

Morgan Stanley chief strategist Michael Wilson wrote in a note on Monday that polls showing Republicans will win a majority in at least one of the two chambers of Congress could be the source of a downward trend in U.S. bond yields and stock prices. The strongest catalyst for the upside, which will be enough to keep the bear market rally going.

3. About the possibility of this midterm election result

According to MorningConsult polling data as of October 31:Biden's approval rating was even lower, at 42%, while the disapproval rate rose to 56%. Among Democrats, Biden's approval rating also fell slightly, from 86% to 83%, and among Republicans, from 10% to 7%. Polls suggest Democrats could lose control of the U.S. House or Senate.

It should be noted that the results of the midterm elections may not be announced on November 8 because the runoff dates in Georgia and Louisiana are after the popular election. Given that Georgia is currently a swing state, the final results of the bipartisan seats may be announced on December 6 at the latest.

If Democrats lose to Republicans in the House or Senate, Democrats' power will be drastically reduced. During the next two years of Biden's term, Democrats can basically say goodbye to any major legislation.

Biden will also face a Republican impeachment attack. If Republicans win some congressional control, they will be able to investigate Democrats through subpoenas and court hearings. Some Republicans have vowed to impeach the president, similar to Trump's impeachment farce in 2020 and 2021 or a repeat of Biden, and market uncertainty will greatly increase.

Tiger Broker analyst Dr Lan once pointed out that the current ruling party is more likely to lose.

4.Stock market performances under Democrats and Republicans at a longer-term cycle

If the Republicans won the White House from the Democrats, the performance statistics for the broader market are as follows:

According to the table, statistics from 1928, when the ruling party switched from "Democratic" to "Republican", the S&P 500's performance and probability of rising after 1 year, 2 years, 3 years, and 4 years were low. The ruling party changed from "Republican" to "Democratic".

Furthermore, since 1961, GDP growth has averaged 2.57% during Republican administrations, compared with 3.9% during Democrats, according to GDP data from Macrotrends.net.

It can be seen that, whether it is the increase of the stock market or the growth of GDP, the economic level of the Democratic Party is higher than that of the Republican Party.