E*TRADE Politics & Portfolios Study Reveals Divergent Investor Sentiment between Republicans and Democrats

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

NEW YORK--()--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.
  • 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.

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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%

About E*TRADE Financial and Important Notices

E*TRADE Financial and its subsidiaries provide financial services including brokerage and banking products and services to retail customers. Securities products and services are offered by E*TRADE Securities LLC (Member FINRA/SIPC). Commodity futures and options on futures products and services are offered by E*TRADE Futures LLC (Member NFA). Managed Account Solutions are offered through E*TRADE Capital Management, LLC, a Registered Investment Adviser. Bank products and services are offered by E*TRADE Bank, and RIA custody solutions are offered by E*TRADE Savings Bank, both of which are national federal savings banks (Members FDIC). More information is available at www.etrade.com.

The information provided herein is for general informational purposes only and should not be considered investment advice. Past performance does not guarantee future results.

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© 2018 E*TRADE Financial Corporation. All rights reserved.

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.


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