2018 Elections: Investors Should View as a Sideshow
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What is the main topic discussed in this episode?
With your money briefing, I'm J.R. Whalen at The Wall Street Journal in New York. Some of the midterm election results will be jaw-dropping and some will be eye-popping. But investors should view the elections as a sideshow and not let them affect their portfolios. We'll tell you why in a moment. First, these money and market stories you should know.
What immediate market headlines should investors know before election results?
Amazon says it is offering free shipping and no minimum purchase on orders delivered through the holidays, countering shipping deals from rivals Target and Walmart. The online retail giant also says it is offering free same-day shipping on more than 3 million items to Amazon Prime shoppers as it looks to boost membership. And customers who pay $119 a year for a Prime membership already receive free two-day shipping with no minimum order. And Wall Street is betting on a natural gas winter season shortage. That pushed futures prices for natural gas for December up nearly 30 cents. That's the largest one-day advance in nearly three years. Higher power consumption amid extreme temperatures boosts natural gas demand.
And a cold winter last year and hot summer weather have kept U.S. stockpiles nearly 20 percent below their five-year average.
The midterm elections will feature some splashy headlines, some upsets, some recounts. But the Wall Street Journal heard on the street team says that should not distract investors.
How might the 2018 midterms cause short-term market reactions?
And columnist Justin Layhart is here to explain. So, Justin, we're going to see no doubt a market reaction to the midterm results. And the market has a scenario baked in where Republicans hold the Senate, but the Democrats take the House.
Yeah, I think that's what most people expect. That's not necessarily what's baked in. Right.
Why do analysts expect a split Congress and what does that mean for markets?
People are always hedging against risk. They're thinking about, you know, what well, what would be the bad thing that can happen? You know, one bad thing I think for the market would be for Democrats to sweep, not just because that could put more pressure on President Trump and, you know, create sort of, you know, political turmoil there.
If there wasn't enough turmoil already and enough division.
Yeah, yeah. And there's also a concern that among some investors that there would be more of a chance of increased infrastructure spending, which would create a deficit problem. And then also on a Republican sweep, maybe equity investors would probably like that if there were prospects of some sort of additional tax cut. But in the treasury market, they wouldn't like that. They might not like that because, again, we have this fiscal problem.
And you write in your column that investors should treat the elections, this year at least, as a sideshow because it's shadowed by some real economic forces that have been at work for some time.
What broader economic forces overshadow the midterms for investors?
Yeah, there's not that much that is going to really change, it doesn't seem to be, with the election. So let's just look at what's going on. So we have the unemployment rate is 3.7%. It's creating wage inflation. And the Federal Reserve is raising rates. And that is not going to stop. Right. The Fed is trying to rein in the economy. We have stimulus that's already in place that is bolstering the economy.
How are unemployment, wage inflation and Fed rate hikes influencing investment decisions?
At some point, that's going to fade. That's a concern. Right. But that's you know, that's another reality of what's going on. And then we have the one political thing that's really affecting markets is the trade situation. But this is not a congressional issue. Right. This is something that Mr. Trump can can and has been doing unilaterally. So how that pans out, how tariffs and trade disputes with China eventually work out, if they get worse and worse, if there's detente, that's not in Congress's – Congress isn't really going to have a say in that.
OK, so labor costs and tariff battles with China, regardless of who has control of whatever chamber of commerce, that's not really going to affect that.
Right. And again, this is the thing to remember is this is what investors have been worrying about.
Why should investors treat the 2018 midterms as a sideshow compared with trade and policy risks?
Right. They haven't been talking. People have been talking a lot about the election, but you don't see the market swinging back and forth because of election ads.
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Chapters
7 chapters
1
What is the main topic discussed in this episode?
0:05–0:24
2
What immediate market headlines should investors know before election results?
0:24–1:32
3
How might the 2018 midterms cause short-term market reactions?
1:32–1:50
4
Why do analysts expect a split Congress and what does that mean for markets?
1:50–2:52
5
What broader economic forces overshadow the midterms for investors?
2:52–3:18
6
How are unemployment, wage inflation and Fed rate hikes influencing investment decisions?
3:18–4:11
7
Why should investors treat the 2018 midterms as a sideshow compared with trade and policy risks?
4:11–4:34
Speakers
2 identifiedMore from WSJ Your Money Briefing
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