Here’s what midterm elections mean for the U.S. stocks

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It’s likely that midterm elections will serve as a significant catalyst for the equities market in the near term, says Allan Boomer. He’s a Managing Partner at Momentum Advisors.

Why does he expect a rally?

His thesis is chiefly predicated on how U.S. stocks have historically responded to midterm elections in the past. Speaking with CNBC’s Brian Sullivan, Boomer said:

I think the midterms are a huge catalyst in the near term. As you get closer to polls, you start to find a stock market that does better. So, once the uncertainty is over, midterms are done, I think stocks should take off at least in the short run.

What he recommends owning in this environment are dividend stocks and ones with a stock repurchase programme in place.

Midterm elections are scheduled for the coming Tuesday, November 8th.

Boomer says the Fed might pivot

Boomer expects a rally also because he’s convinced that the U.S. Federal Reserve is turning at least a bit dovish.

In the news conference earlier this week, Chair Powell did say that it was “very premature” to consider pausing just yet (source). But it’s the FOMC statement that matter more, Boomer added.

I read more into what was written. That’s where they’re careful about the words. So, I see a dovish pivot. They’re saying we’ll still fight inflation, but let’s recognise the cumulative impact from these hikes.

Ahead of the midterm elections, S&P 500 is up 5.0% versus its recent low but down more than 20% versus the start of the year.

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