The anticipated “red wave” in the midterm elections turned out to be a ripple. As of this writing Wednesday morning, control of the House and Senate was still up in the air.

Are you scratching your head over what the midterm election results mean for investors? Here’s the upshot: Nothing radical, from the left or right, will emerge from Congress over the next two years. Neither the Democrats nor the Republicans will be able to muster a sizable legislative majority. And President Biden still wields a veto pen.

Sweet gridlock! You can almost hear the collective sigh of relief on Wall Street. But there’s at least one industry that clearly benefited from the midterm elections. I’ll explain more, below.

Regardless, you should never get hung up on political labels and “isms.” Money is neither red nor blue. It is green.

The business of America is…business

When President Franklin Delano Roosevelt was asked at a press conference whether he was a capitalist, a communist, or a socialist, he simply responded: “I am a Christian and a Democrat, that’s all.”

Or as President Calvin Coolidge once said: “The chief business of America is business.”

Over the next two years, we’ll continue to witness acrimony and extreme rhetoric in Congress. But nothing tangible will emerge from Washington that interferes with the pursuit of profits.

The House appears likely to enter Republican control, but its projected majority (about +10 seats) is so small, GOP leader Kevin McCarthy (D-CA) would struggle to pass…anything. And in the 50-50 Senate, it’s possible that Democrats could actually gain seats.

There are many possible reasons for the better-than-expected showing of Democrats on Tuesday: abortion rights mobilized women; Donald Trump-endorsed candidates were flawed; Trump’s appearance on the hustings reminded millions of Americans that they don’t like him; President Biden’s warnings about the threat to democracy resonated; and so on.

Historically, the party that wins the White House gets clobbered in the ensuing midterms, but it appears that Democrats have defied political history.

In the coming days, millions of votes remain to be counted, many in battleground states such as Pennsylvania, Nevada and Arizona. The election deniers have already promised to wreak havoc with fruitless lawsuits and baseless charges of fraud, but in the end, the hollering about a “rigged election” will amount to little more than impotent hysteria on social media.

You can take comfort in knowing that Wall Street is driven more by corporate earnings than politics. Consider this revealing fact, unearthed by the research firm FactSet: few S&P 500 companies to date have commented on the midterm 2022 elections during their earnings conference calls for the third quarter. Indeed, few have done so historically, going back at least three midterm cycles (see chart).

According to data, markets have gained under nearly all combinations of political control for the White House, Senate and House.

The S&P 500 has historically outperformed the market in the 12-month period after a midterm election, with an average return of 16.3%, regardless of any permutation of political control.

The bottom line holds its own…

For the third quarter, with 85% of S&P 500 companies so far reporting actual results, 70% of companies have posted a positive earnings surprise and 71% have posted a positive revenue surprise.

For Q3, the “blended” year-over-year earnings growth rate for the S&P 500 is 2.2%. Blended combines actual with projected results. For calendar year 2022, analysts expect earnings growth of 5.6%.

As 2022 winds to a close, you may want to consider bargain hunting. The forward 12-month price-to-earnings (P/E) ratio for the S&P 500 is 16.1. This P/E ratio is below the five-year average (18.5) and below the 10-year average (17.1)

The big worry, of course, continues to be inflation. However, inflation has shown signs of peaking. Wall Street is betting that inflation will continue to ease and eventually move closer to the Fed’s target of 2% in 2023.

WATCH THIS VIDEO: Cannabis News That Investors Can Use

The industry that just experienced a growth catalyst because of the midterms? Marijuana, or as I like to call it, “Big Weed.”

In the November 8 midterm elections, voters in South Dakota, Arkansas, Missouri, North Dakota, and Maryland considered recreational marijuana initiatives.

Maryland and Missouri voters on Tuesday approved ballot measures to legalize recreational marijuana. Legalization initiatives failed in South Dakota, North Dakota, and Arkansas. Medical marijuana already is legal in Maryland and Missouri.

However, Texas voters in five cities on Tuesday approved marijuana decriminalization ballot measures. An initiative in Colorado to legalize psilocybin (the psychoactive ingredient in “magic mushrooms”) was, as of this writing, too close to call.

Maryland and Missouri are populous, affluent, and influential states; advocates of marijuana normalization can rightfully claim substantial victory by adding those two states to the column for legal recreational use. New state and local legal markets equal more customers, greater profits…and higher share prices for cannabis equities.

Marijuana has emerged as a consumer staple, as reflected by the soaring sales this year for pot. That’s why I just launched a brand-new service detailing how you can financially benefit from the legalization of cannabis. Called Marijuana Profit Alert, it’s your guide to making money in these tumultuous times. Click here to learn more.

John Persinos is the editorial director of Investing Daily. You can reach John at: mailbag@investingdaily.com

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