Voter / Investor Trends

Politics And Portfolios

New study reveals divergent investor sentiment between Republicans and Democrats

Republicans skew more bullish than Democrats on the market yet less positive on personal impact

November 15, 2018 — NEW YORK–(BUSINESS WIRE)–E*TRADE Financial Corporation (NASDAQ: ETFC) today announced results from its Politics & Portfolios study on voting investor sentiment as a result of the midterm elections:

Republicans skew more bullish
Republicans over-index in bullishness, with 38% saying they are more bullish toward the market than they were before the election. Democrats are slightly less optimistic, with 33% expressing more bullishness.

Republicans less positive
Yet Republicans are also less positive about the personal impact of the results: Republicans are significantly more pessimistic across every measure tested, including how the new Congress will impact their investing portfolio, taxes, savings and bonds yields, inflation, debt interest, and cost of goods and services.

Majority of Democrats expect more volatility
Democrats (53%) are more likely than Republicans (43%) to believe that volatility will increase as a result of the elections.

Roughly half of Republican and Democrat investors plan to reallocate their portfolio
50% of Republican and 49% of Democrat investors will either change their allocations, move into cash, or move out of cash into new positions.

Democrats are significantly more likely to think the end of the bull market is near
While the majority of both parties believe the bull market will end within the next two years, Democrats skew significantly more likely (25%) to think the end is right around the corner, versus 17% of Republicans.

“Major events like this are a good time to revisit portfolio allocations—determine what level of risk you can live with, and rebalance accordingly,” said Mike Loewengart, VP of Investment Strategy at E*TRADE Financial. “While the outcome of the election returned some certainty to the markets, unknowns still exist at the crossroads of politics and finance, including trade disputes, tax reform, and regulatory action, just to name a few. With many pundits predicting that our historic bull run could be coming to an end, any one of these challenges could rattle the market, which is why it’s more important than ever to be well-diversified and focused on the long term.”

The survey also explored voting investors’ thoughts on sector opportunities as a result of the midterm elections. Despite the divergence in overall sentiment, the results reveal strikingly united opinions on which sectors stand to benefit:

  • Health care
    Investors on both sides of the aisle believe this sector is the most likely to benefit from the midterms, as it soared post-election amid predictions that the proposed repeal of the Affordable Care Act would be taken off the table.
  • Financials
    Both Republican and Democrat investors think this recently beaten-down sector is ripe for a comeback post-midterms, as the administration can continue to push deregulation amid a backdrop of rising interest rates.
  • Energy
    This sector ranked third among both Republican and Democrats as having the potential to benefit from the midterms. Much like financials, energy has recently come under pressure but could rebound amid a favorable regulatory environment and a gridlocked Congress.

To view an infographic of the findings, visit www.etrade.com/commentary.

E*TRADE aims to enhance the financial independence of traders and investors through a powerful digital offering and professional guidance. To learn more about E*TRADE’s trading and investing platforms and tools, visit etrade.com.

About the Survey
This wave of the survey was conducted from November 7 to November 12 of 2018 among an online US sample of 900 self-directed active voting investors who manage at least $10,000 in an online brokerage account. The survey has a margin of error of ±3.50 percent at the 95 percent confidence level. It was fielded and administered by Research Now. The panel is 47% Republican and 43% Democratic, as well as 40% female and 60% male, with an even distribution across online brokerages, geographic regions, and age bands.

Referenced Data

As a result of the midterm elections, what is your outlook on the US financial markets?
Total Democratic Republican
More bullish 35% 33% 38%
Much more bullish 10% 10% 11%
Somewhat more bullish 25% 23% 27%
No change 45% 47% 42%
Somewhat more bearish 17% 18% 17%
Much more bearish 3% 2% 3%
More bearish 20% 20% 20%

Please indicate the impact you believe the new Congress will have on the investments
in your portfolio

Total Democratic Republican
Positive 42% 47% 39%
Very positive 17% 20% 16%
Somewhat positive 25% 27% 23%
No impact 41% 42% 36%
Somewhat negative 15% 10% 22%
Very negative 2% 1% 3%
Negative 17% 11% 25%

Please indicate the impact you believe the new Congress will have on that taxes you pay
on your investments

Total Democratic Republican
Positive 33% 37% 30%
Very positive 11% 13% 10%
Somewhat positive 22% 24% 20%
No impact 41% 47% 34%
Somewhat negative 22% 14% 30%
Very negative 4% 2% 6%
Negative 26% 16% 36%

Please indicate the impact you believe the new Congress will have on the yields you are
likely to receive from savings and/or fixed income

Total Democratic Republican
Positive 41% 44% 40%
Very positive 11% 13% 11%
Somewhat positive 30% 31% 29%
No impact 42% 43% 39%
Somewhat negative 14% 12% 17%
Very negative 3% 1% 4%
Negative 17% 13% 21%

Please indicate the impact you believe the new Congress will have on the inflation you may
encounter as a consumer

Total Democratic Republican
Positive 29% 34% 27%
Very positive 10% 11% 10%
Somewhat positive 19% 23% 17%
No impact 38% 39% 35%
Somewhat negative 29% 25% 32%
Very negative 4% 2% 6%
Negative 33% 27% 38%

Please indicate the impact you believe the new Congress will have on the interest you pay on
your debt, mortgage, and other loans

Total Democratic Republican
Positive 26% 31% 23%
Very positive 10% 12% 10%
Somewhat positive 16% 19% 13%
No impact 49% 48% 46%
Somewhat negative 21% 19% 24%
Very negative 4% 2% 7%
Negative 25% 21% 31%

Please indicate the impact you believe the new Congress will have on the prices you pay for
goods and services

Total Democratic Republican
Positive 32% 36% 30%
Very positive 11% 14% 11%
Somewhat positive 21% 22% 19%
No impact 34% 39% 29%
Somewhat negative 30% 22% 35%
Very negative 4% 3% 6%
Negative 34% 25% 41%

As a result of the US midterm elections, do you think market volatility will…

Total Democratic Republican
Increase 47% 53% 43%
Greatly increase 12% 15% 10%
Somewhat increase 35% 38% 33%
Stay the same 41% 37% 43%
Somewhat decrease 11% 9% 13%
Greatly decrease 1% 1% 1%
Decrease 12% 10% 14%
Amid an unprecedented bull market run, how many years do you think we have left?
Total Democratic Republican
5+ years 9% 8% 11%
3-4 years 24% 26% 25%
1-2 years 34% 28% 36%
The end is near 21% 25% 17%
I don’t know 12% 13% 11%
As a result of the midterm elections, which of the following strategies are you planning to deploy?
Total Democratic Republican
Move out of current positions and in to cash 13% 15% 11%
Move out of cash and in to new positions 16% 16% 16%
Change the allocations in my portfolio 19% 18% 22%
Make no changes to my portfolio 51% 51% 50%
Other 1% 0% 1%
Which sectors do you think will benefit most from the midterm election? (Top three)
Total Democratic Republican
Health care 58% 59% 58%
Financials 42% 43% 41%
Energy 38% 41% 36%
Information technology 33% 36% 32%
Consumer staples 29% 26% 29%
Industrials 27% 28% 25%
Consumer discretionary 24% 25% 23%
Utilities 17% 13% 21%
Materials 17% 15% 19%
Communications services 15% 14% 16%

 

 

 

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E*TRADE Financial Corporation and Research Now are separate companies that are not affiliated. E*TRADE Financial Corporation engages Research Now to program, field, and tabulate the study. Research Now Group, Inc. provides digital research data and has locations in the Americas, Europe, the Middle East and Asia-Pacific. For more information, please go to www.researchnow.com.