Cambridge Associates says US midterm results do not warrant portfolio changes
SPY•Cambridge Associates sees no reason to change portfolio allocations solely because Democrats gained seats in Congress, saying fundamentals and valuations remain key drivers. It cited average US equity excess returns of 15% in the 12 months after midterm elections since 1930.
1. Portfolio allocations
Cambridge Associates said congressional gains by Democrats do not, on their own, warrant portfolio changes, and that fundamentals and valuations remain the key drivers.
2. Risks and returns
The firm said tighter local restrictions could raise costs for AI-linked projects, while uncertain returns favor diversification over concentrated exposure. It also cited substantial borrowing needs and energy-driven inflation as factors that could keep Federal Reserve policy restrictive and Treasury yields elevated.
3. Election history and conflict
US equities’ excess returns have averaged 15% in the 12 months following midterm elections since 1930, across different political compositions. The firm said further escalation of the Iran War could pressure equities and bonds through higher energy prices, while a durable ceasefire could support risk assets in 2027.
