2010 Is Shaping Up To Be Much Like 1994

In case you are living under a rock, midterm elections are scheduled to be held this Tuesday (November 2nd) in the United States.

The Republicans are looking to ride the wave of voter discontent and turn in an impressive performance on Tuesday. Based on all of the data that has appeared in the press over the past days and weeks, it certainly appears as though there will be a sizable shift in the make-up of Congress after this Tuesday.

Sound familiar? It should, as 2010 is shaping up to be much like 1994.

President Bill Clinton ended up being elected to a second term, but his first couple of years in office were anything but smooth. Clinton invested an enormous amount of his political capital in trying to pass his health care plan, which ended up proving unsuccessful. Republicans seized on the opportunity in a big way.

The "Contract With America" was released by the Republican party during the 1994 Congressional election campaign. Some people credit the "Contract with America" with really putting the Republicans over the top in 1994, allowing them to gain both control of the Senate and the House of Representatives. This would be the first time that Republicans had held majority control of both houses of Congress since 1953.

The Republicans ended up with a +54 seat swing in the House of Representatives and a +8 seat swing in the Senate in 1994, which is a similar result to what many people are predicting for this year.

Fast forward to 2010. Voters have become increasingly angry about the state of the country over the past couple of years. The majority of the anger is centered around the feeble economic "recovery" and the high rate of unemployment. The Democrats currently have the White House, House of Representatives and Senate, which means that they will be receiving the brunt of voter anger on November 2nd.

How might the markets react in the days and months after the midterm elections this year? It's impossible to say with any certainty, but let's see how the markets reacted in late 1994-1995 after the Republican landslide in November of 1994.

The 1994 midterm elections took place on November 8th, 1994.

Here is where the major averages closed on November 8th, 1994:

DJIA - 3,830.74
NASDAQ - 767.54
S&P 500 - 465.65

On November 9th, after the results of the midterm elections had been tabulated and released to the public, the markets were basically unchanged.

By the end of 1994, the major averages were looking like this:

DJIA - 3,834.44
NASDAQ - 751.96
S&P 500 - 459.27

Again - not much of a change.

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1995 was a different story.

The markets ignited in 1995, with all three major indexes posting gains of over 30%:

DJIA - 5,117.12, +33.45%
NASDAQ - 1,052.13, +39.92%
S&P 500 - 615.93, +34.11%

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1996 would be more of the same, with the DJIA, NASDAQ and S&P 500 all posting gains in excess of 20% in the last year of Bill Clinton's first term as president.

Here is where the three major indexes finished by the end of 1996:

DJIA - 6,448.27, +26.01%
NASDAQ - 1,291.03, +22.71%
S&P 500 - 740.74, +20.26%

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Things are obviously quite a bit different now than they were in 1995 and 1996, but posting stats like these is what I do.

Source: Davemanuel.com - Where Did The DJIA, Nasdaq and S&P 500 Trade On..

Filed under: General Knowledge