History on the side of bulls during US midterm elections | The Financial Express

History on the side of bulls during US midterm elections

Washington is likely headed for gridlock, which Wall Street doesn’t mind at all.

History on the side of bulls during US midterm elections
S&P 500 has climbed during the period following every midterm election since 1942.

By Ben Rains

Midterm elections have historically marked bullish pivot points for the stock market no matter the outcome, while the runups often represent the worst stretches of any given four-year presidential term. This backdrop could help many investors start to turn big profits again after what’s been a rough year so far.

The historic strength that follows midterms doesn’t require investors to get too complicated. What is necessary is the ability to take a giant step back and find areas of the market and stocks that will benefit from large-scale trends that are difficult to bet against. Mandatory government spending, tax incentives, and sweeping socioeconomic and demographic patterns must be capitalized on.

With bullish midterm election history on your side, right now appears to be a great time to start investing in stock market segments that offer nearly surefire long-term growth runaway.

Also Read: U.S. midterm election outcome to boost Wall Street?

Market Rebound Ahead? History Says So

The market certainly suffered a massive downturn during the first three quarters of 2022, driven by a multitude of compounding factors we are all too familiar with. Luckily, positivity is starting to peek through the clouds of uncertainty, with the S&P 500 rebounding through the early weeks of the third-quarter earnings season.

History is on the side of the bulls as we enter the midterms, considering that the S&P 500 has climbed during the year period following every midterm election since 1942, averaging a 15% return. These long-term trends favor investors willing to buy stocks right now, especially if they know where to look.

There’s no need for investors to rack their brains to come up with precise investment strategies for every possible mid-term election scenario. And there isn’t one outcome that must be achieved or avoided either.

Also Read: US CPI report this week is a significant economic indicator that could influence the Fed

Washington is likely headed for gridlock, which Wall Street doesn’t mind at all. Gridlock is something investors and the market are very familiar with since Washington has been divided roughly 70% of the time, dating back to 1981.

The broader market also doesn’t favor either party in particular over longer time frames. For instance, the average annual stock market returns during the Trump and Obama administrations—which included periods of unified and divided governments—were almost exactly the same at roughly 16%.

Wall Street is unemotional and apolitical. The average retail investor should be as well.

(Author is Stock Strategist, Zacks Research)

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First published on: 08-11-2022 at 08:29 IST