If you want to know what the stock market is going to do in reaction to the midterm elections, here is a bit of inside information. The greater the victory by the Republicans the greater the economy and stock market will improve. So if you want to speed up the economic recovery, vote Republican.
In most off year elections the minority party wins the most seats and the stock market always gains more on average after a midterm election than after a presidential election. Obama should know, he got elected and the stock market promptly crashed.
The market has been slowly trending up this year as the Republican victory got nearer. The larger the GOP victory tomorrow, the stronger the market will react for the better.
Part is a result of the anti-business attitude of our young president, part is a result of the social leaning agenda of Obama and the Democrats, part is because of the record setting deficit spending and record increase in the national debt under Obama, and part is the historical pattern of minority success in midterm elections.
Make no mistake, the Republicans are going to win and win big.
According to Brian Gendreau, market strategist for Financial Network, in the period from 1922 to 2006, the average gain of the Dow Jones Industrial Average over the 90 trading days following midterm elections (roughly November until mid-March) was 8.5%, according to a new study he authored.
That's almost 5% higher than the Dow's gains in presidential election years.
During the midterm elections the only time the ruling party gained seats in both the House of Representatives and Senate was in the 2002 elections, and the market fell afterward - making it the only time since 1942 that the Dow has fallen after a midterm election.
In the days before midterms, the market generally tends to perform well, just as it has this year.
"The market starts to go up beforehand and it just doesn't stop," said Gendreau.
While past performance is no indication of future success, consider this: The Standard & Poor's 500 Index has posted gains for every 200-trading day period following mid-term congressional elections since 1942. Stocks surge, on average, by a whopping 18.3% in those 200 days, according to the Leuthold Group, a Minneapolis-based investment-research firm.
The S&P index chalked up its biggest 200-day gain, 30.5%, in 1942, as the tide began to turn in World War II. The smallest gain, 3.9%, came in 1946, as investors worried that the economy would sink into another depression.
Like I said, save the economy, vote Republican!