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2018 Midterm Elections – History vs. Hype

By Ken McCarthy, Principal Economist

Although the Trump presidency has been historic and unprecedented in many ways, key economic indicators – job growth, consumer spending, inflation – remain the best gauges to predict the performance of commercial real estate.  So, let’s examine the history of midterms in the United States and CRE.

What’s at stake? Which political party will control the House of Representatives and the Senate? Currently both are in Republican hands.

mid term elections USA

The party of the President has historically lost seats in midterm elections, particularly when the President’s approval rating is lower than 50%.

What are the polls telling us? Most seats are safely controlled by the current party but there are enough toss up seats that the outcome is far from clear. It appears that there are up to 30 “toss up” seats in the House. The number of those seats that go Democrat will determine the party in power. In the Senate the number of “toss up” seats is projected at from 2 to 9, but with such a narrow majority it will only take a couple of shifts to change the party in power in the Senate.

What does it mean for the economy? Historically, the results of the midterms elections have had little impact on the performance of the U.S. economy. However, in years following a midterm election, the S&P 500 2-year return has been highest under a split Congress (12.3%); it has averaged 4.5% under a unified government. And we know that the stock market has an important wealth effect; in the current cycle, every $1 increase in the stock markets boosts consumer spending by 4.5 cents. It also has a positive multiplier on commercial real estate.: Strong consumer spending equals higher business profits equals stronger job growth equals stronger demand for space.

While there are some differences depending on timing and party in power, the rate of growth of CRE prices barely changes before or after a midterm election. Historically, average NCREIF returns have been higher in periods immediately following a midterm.
Cushman & Wakefield currently forecasts strong U.S. GDP growth in the balance of 2018 with the full year forecast to see 3.0% growth, For 2019 Cushman & Wakefield forecasts 2.5% growth.

What does it mean for me? Midterm elections are important because they give the people a voice in how the country is governed. Even though we do not believe the midterm elections will have a significant impact on the economy or real estate, we should all go out and express our opinion by voting for the candidates who we believe will best represent us. Please be sure to go out and vote.


Ken  McCarthy has been with Cushman & Wakefield since August 2006. As Principal Economist, he works with the Chief Economist on Cushman & Wakefield’s U.S. economic position and presents it to the public. As Applied Research Lead, Ken is responsible for preparing cutting edge research about the outlook for commercial real estate in the Americas.

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