With U.S. midterms behind us, let's focus on what really matters

November 8, 2018 Patrick Ercolano


I could try to tell my colleagues that I did a lot of overtime analyzing election results this week, but I don't need to. Anybody who knows me understands that I enjoy election nights.

Whether I'm watching provincial, federal or midterm elections in another country, I mostly appreciate the human nature on display as individuals put their names on a ballot and elaborate on their platforms and communicate to their constituents. I also enjoy seeing the results and hearing the sometimes brutally honest voice of the voter.

Today, both political parties in the United States are claiming victory as midterm election results are counted and finalized.

No surprises last night

Fortunately there haven't been many surprises; things have played out largely as we've expected: We've learned that the Democrats will lead the House of Representatives with a small but meaningful majority, while the Republicans will lead the Senate after winning a few more seats to secure a narrow majority.

Although the results show just how politically divided Americans are at the moment, politics don't influence markets over a 12-month period, policies do. As both sides claim victory, it is still too soon to know what legislative priorities each side will have going forward.

Less uncertainty is always good

For markets, any uncertainty creates volatility. Markets rallied Wednesday morning as the results came in and some of that uncertainty dissipated.

That said, midterm elections are not a surprise event. Different results and their ramifications are both areas we've examined closely in our regular analysis of geopolitical events; our investments are positioned accordingly.

Analyzing what really matters

Now that midterm elections are behind us, from a global macro perspective we can now focus on economic growth, trade, interest rates, central bank policy and corporate earnings – all of which will play a significant role in our positioning going forward.

For example, when reviewing current conditions to make tactical portfolio adjustments, our analysis at the moment includes, but isn't limited to watching Italy negotiate the amount of debt the country can shoulder with the European Union, a number of Brexit related scenarios and most importantly, the ongoing trade dispute between China and the U.S. This is just a portion of the investment considerations and decisions being made within MD portfolios every single day.

As always, we will continually analyze these scenarios and others, as we closely monitor geopolitical events which could impact our positioning and markets at large.

If you have any questions about your portfolio, please contact your MD Advisor.


About the Author

Patrick Ercolano

Patrick Ercolano, CFA, MBA, is a former Lead Portfolio Manager with the Investment Management and Strategy team at MD Financial Management. He oversaw the strategic and tactical asset allocation mandates, alternative investment mutual funds and was a member of MD’s Tactical and Risk Allocation Committee.

More Content by Patrick Ercolano
Previous Article
No big surprise as U.S. Fed holds rate steady
No big surprise as U.S. Fed holds rate steady

The U.S. Federal Reserve decided to keep their target interest rate range at 2.00% - 2.25%. But we can expe...

Next Article
China braces for U.S. tariffs
China braces for U.S. tariffs

China's growth story over the past 20 years has been epic—in just a couple of decades, it's gone from...


Subscribe to our Newsletter

I allow MD Financial Management (including MD Financial Management Inc., MD Management Limited, MD Private Trust Company MD Life Insurance Company and MD Insurance Agency Limited), the Bank of Nova Scotia and other members of the Scotiabank group of companies (“Scotiabank Members”) to send me electronic messages (such as emails and SMS text) about their products and services, offers, events, and other valuable information as well as information about the products and services of other Scotiabank trusted partners that may be of interest to me.  This consent is being sought on behalf of each MD Financial Management and Scotiabank Member which includes any company(ies) or person(s) that form a part of the Scotiabank group of companies in the future. View the MD Privacy Policy here.
Thank you!
Error - something went wrong!