Weighing the Week Ahead: What do the Mid-Term Elections Mean for Financial Markets?

We have a huge economic calendar. While employment data will get most of the attention, there are also important reports on ISM manufacturing, personal income, PCE prices, consumer confidence and auto sales. Earnings season continues with another big week of reports. In normal times these topics would provide plenty to think about. Nowadays, none of this seems important. If the stock decline continues at the start of the week, that will take center stage. We’ll probably get another “crisis” prime-time feature from CNBC, bumping Shark Tank or Jay Leno.

If things calm down a bit, expect to see the punditry turn attention to the US mid-term elections, asking:

How will the mid-term elections affect financial markets?

As always, WTWA does not advocate particular candidates. As citizens, we should all do what we think is correct. As investors, we should be politically agnostic. That does not mean blind and deaf. Elections have an impact on the markets overall as well as individual stocks. That should be our focus.

Last Week Recap

In my last edition of WTWA I suggested to expect a week of wondering what could go wrong, mostly fueled by misperceptions. That is exactly what happened, with daily discussions of the “message” of the market, telling us something we otherwise would not see. There may well be more of the same, but this week will have even more competition for attention.

The Story in One Chart

I always start my personal review of the week by looking at a great chart. This week I am featuring the futures chart from Investing.com. The image posted here shows a static view. If you go to the site, you can check out the news at various points during the week and adjust the view in many other ways. Since futures trade when the stock market is closed, you can also see that trading.

The market declined 3.9% and the weekly trading range was 4.8%. Both were extremely high. The VIX implied volatility measure remained higher than the actual results. I summarize actual and implied volatility each week in our Indicator Snapshot section below.


There is a fascinating update of the four-year old “trolley problem.” The original question asked whether you should switch a speeding, runaway trolley from one track (with five people in the path) to another (with only one potential victim). The new study, with the inclusion of self-driving cars, raises questions of great interest without obvious answers. Those interested might also consider the variations from different cultures. For example, which countries give emphasis to the elderly?