March 26, 2019
Craig Holke, Investment Strategy Analyst
Unsettled - What Voter Discontent May Mean for Markets
Low presidential and congressional approval tends to result in increased leadership turnover. This may result in higher market volatility as policy uncertainty rises.
- Political uncertainty may lead to increased market uncertainty. Frequent change in congressional and presidential leadership could lead to increased market volatility, as individuals and businesses may be unsure of future policies.
- Well-diversified portfolios may help to insulate against politically-driven volatility. We encourage investors to conduct a portfolio review and rebalance more frequently, while considering moving funds into assets or markets that may look more attractive.
What do we really think of the people that we elect?
We have federal elections every two years that help to determine the future course of our country. We elect leaders to represent us in the Senate, the House of Representatives, and the presidency. The electorate is fairly divided by party these days. This tends to result in close elections. When combined with the constant presence of social media and political news media, it also can lead to voter dissatisfaction with those in charge. Recent elections have resulted in the current party in power losing control more frequently than in the past.
Even with an economy that has posted solid growth in recent quarters and continues to grow above trend, voter dissatisfaction remains high. Chart 1 reflects the view of whether voters believe that the country is headed in the right direction—or the wrong direction. The two times in recent history that the “wrong direction” has been in the minority was in 2009 and 2017, following the election of Presidents Obama and Trump. Unfortunately, after electing new leaders, this optimism has been short-lived.
If many voters do not like the direction in which the country is headed, one would expect them to elect officials that they believe will make things better. As Chart 2 shows, that is not necessarily the case. With regard to presidents, overall approval ratings have been trending down. President Trump’s voter approval consistently ranges between 40% and 50%. While this range seems low, neither President George W. Bush (49.4%) nor President Obama (47.9%) could break the 50% approval level. President Clinton came in at 55% voter approval, and President George H.W. Bush held an average of 61%. To top that, we would need to go all the way back to President Kennedy (at 70%).1
Overall, congressional approval ranks far below even President Trump’s approval rating. Although Chart 2 only goes back to the beginning of the current administration, this trend has persisted over time. We elect our representatives to Congress, but a significant number of voters do not seem to approve of the current political environment or the accomplishments in Congress.