Markets, Elections and China

China Lockdowns


Over the weekend, following the data on Black Friday and holiday shopping, we received news regarding major China protests, across the country, against Covid lockdowns and poor working conditions. That news has riled Asian markets and has hit certain sectors of our market. Indirectly, our entire ecosystem is connected to China, with them being a large part of our supply chain. We are seeing companies within certain sectors of the market hurting today due to their large presence in China. The energy market is down because of the thought of these protests. One would think that since they are protesting the lockdowns and negative working conditions, there may be a change for the better to follow. However, the markets are telling us the exact opposite. The government will likely crack down on these issues, causing the lockdowns to be more severe, less usage of commodities and energy, less working, worse working conditions, and less productivity. The news is reporting on how these protesters are gaining steam and getting more attention than normal, but the market is saying the opposite. The market is saying that these protesters are likely going to have more severe consequences on the other side, which affects demand for a lot of products globally. This is not something that will necessarily impact us today and is not something that we were expecting to be a big news event, but it is something that we feel needs to be watched very closely moving forward.


Historical Markets


The midterm elections are mainly over and what we are looking at is a Democratic Senate and a Republican House with a Democratic President. On a recent episode, we discussed two scenarios that we thought were most likely to play out heading into the midterm elections. One of the charts shown in this episode is from early November when we said one possible outcome of the elections was a Republican sweep with a Democrat President. The other possible outcome we estimated was a Democratic Senate with a Republican House. As it turns out, the latter has become a reality. You can see the average annual performance, going back to 1933 when we had this kind of layout in the political landscape, was actually better than with a Republican Congress and a Democratic President. The market’s annual performance was the second best, coming in at 13.6% for that time frame. We thought this was something to keep an eye on and it’s great that it played out how we thought it would. Every year since 1942 the market has been up an average of 15% for the twelve months following a midterm election. Of course, there’s no guarantee and historical returns don’t mean future returns, but it’s still good data to look at it while we are dealing with inflation, recession talk, and other negative things out there. An average of a 15% gain and nothing negative to report from the past midterm election years gives us a little more positivity when it comes to the political landscape and how it’s associated with the markets. This is data that we provided in other episodes throughout the year as we navigated through the volatility of the markets, and we will continue to stick with that as we watch things. You can always have a surprise, but this is the kind of data we want our clients to know about and how we are looking at it in relation to their portfolios and the markets.


Greg Powell, CIMA®
President and CEO
Wealth Consultant
Email Greg Powell here

Trey Booth, CFA®, AIF®
Chief Investment Officer
Wealth Consultant
Email Trey Booth here

Ty Miller
Associate Vice President
Email Ty Miller here

Fi Plan Partners is an independent investment firm in Birmingham, AL, with a team of professionals serving clients across the nation through financial planning, wealth management and business consulting. The team at Fi Plan Partners creates strategies in the best interest of their clients using fee based investing.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Economic forecasts set forth in this presentation may not develop as predicted.

No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.

Securities and advisory services offered through LPL Financial, Member FINRA/SIPC and a registered investment advisor.

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