If the midterm elections go as Wall Street expects, stocks should rally into year-end, according to RBC.
Voters go to the polls Tuesday, and the consensus view is that Republicans will take back control of one or both chambers. "The conventional wisdom that the stock market likes political gridlock is supported by the historical data in this instance," Lori Calvasina, RBC's head of U.S. equity strategy, wrote in a note to clients Monday. The average S & P 500 returns are higher in the years when a Democrat is president and the GOP controls Congress, her analysis showed.
Back then, the S & P rallied back 20% from its October lows, she said. However, the biggest positive impact on the market would be the GOP gaining full control of Congress, she said. "Republicans' chances of taking back the Senate have generally been viewed as lower than their chances of taking back the House," she said.
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