Market Effects of Midterm Elections

Market Effects of Midterm Elections | Sheaff Brock Perspective

Market Effects of Midterm Elections

“A quick look at historical performance shows that stocks often see rough sledding in the September of years that feature midterm elections,” MarketWatch comments, adding that it was not “clear that the midterm congressional elections on Nov. 6 … would be enough to derail the bull market.”

One thing that has characterized midterm seasons, Sheaff Brock Managing Director Dave Gilreath notes, is greater stock price volatility. In fact, he notes, midterm years have been more volatile than the average. The flip side of the pattern is that, based on data going back 14 cycles, in the year after a midterm election, the S&P has climbed an average of more than 31% from the correction low.

Interesting … It matters little which party was in charge before or after the midterm. Apparently it’s the removal of uncertainty that allows markets to resume focusing on fundamentals, analysts posit.

S&P Index Performance Before and After Midterm Elections | Sheaff Brock


S&P Performance Following Midterm Elections Since 1950 | Sheaff Brock

“There’s a reason why investors salivate when midterm elections cycle through,” commented four years ago. “It’s been a very bullish catalyst for the markets and has been for decades.” On average, the S&P 500’s return between October 31 of the midterm year and October 31 of the following year has been an eye-popping 15.3%”!

Sheaff Brock’s Gilreath isn’t either fazed or amazed during this midterm election season. “It’s all about the economy, he realizes, and the economy is strong. In fact, stocks are cheaper now than they were at the start of the year, he points out. The average forward P/E ratio for the S&P 500 is 16, (“and that’s not high at all,” he observes), and corporate earnings are up 25% this year.

In fact, one of several resources the firm utilizes for research, the Strategas “Bull Market Top Checklist,” Gilreath points out, affirms the message of underlying strength in the stock market, suggesting that “real trouble is a long way off.”

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