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llustration: Aïda Amer/Axios

Midterm elections have historically been a no-lose scenario for stocks. Dating back to the 1950s, the S&P 500 has always been higher a year after the midterms, no matter the outcome. According to Capital Ideas, stocks in the year following midterms have performed twice as well as other years.

The bottom line: Markets may shrug if there is a Democratic sweep, because the next Congress is "very unlikely to undo the major market-impactful legislation that has already been passed under President Trump," like tax cuts, strategists at UBS point out.

If Republicans maintain control, stocks could jump higher temporarily, Art Hogan, a strategist at investment firm B. Riley FBR said, because investors will think "here comes more deregulation, and tax cuts 2.0 — but then they will realize we might have more work to do than that."

The impact on the economy is more uncertain.

  • If Democrats take the House and the Senate, brace for "slower economic and employment growth," since it eliminates the possibility of another tax-cut boost to the economy, John Herrmann, who heads up interest rate research at MUFG Securities, wrote in a note.
  • Gridlock won't "capsize the economic boat," S&P Global's chief economist Beth Ann Bovino wrote in a research note, but it will create big questions around government spending, which boosts economic growth.

What to watch: The midterms are in "second place" on investor's minds after worries about China and trade, Hogan said.

Go deeper

10 hours ago - World

Maximum pressure campaign escalates with Fakhrizadeh killing

Photo: Fars News Agency via AP

The assassination of Mohsen Fakhrizadeh, the architect of Iran’s military nuclear program, is a new height in the maximum pressure campaign led by the Trump administration and the Netanyahu government against Iran.

Why it matters: It exceeds the capture of the Iranian nuclear archives by the Mossad, and the sabotage in the advanced centrifuge facility in Natanz.

Scoop: Biden weighs retired General Lloyd Austin for Pentagon chief

Lloyd Austin testifying before Congress in 2015. Photo: Chip Somodevilla/Getty Images

Joe Biden is considering retired four-star General Lloyd Austin as his nominee for defense secretary, adding him to a shortlist that includes Jeh Johnson, Tammy Duckworth and Michele Flournoy, two sources with direct knowledge of the decision-making tell Axios.

Why it matters: A nominee for Pentagon chief was noticeably absent when the president-elect rolled out his national security team Tuesday. Flournoy had been widely seen as the likely pick, but Axios is told other factors — race, experience, Biden's comfort level — have come into play.

Updated 12 hours ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Health: WHO: AstraZeneca vaccine must be evaluated on "more than a press release."
  2. Politics: Supreme Court backs religious groups on New York COVID restrictions.
  3. World: Thailand, Philippines sign deal with AstraZeneca for vaccine.
  4. Economy: Safety nets to disappear in December Black Friday shopping across the U.S., in photosAmazon hires 1,400 workers a day throughout pandemic.
  5. Education: National standardized tests delayed until 2022.