Midterm Elections — Before and After

Advice to the Advisors

Midterm Elections and Impact on the Market | Sheaff Brock Perspectives

Midterm Elections — Before and After

Advisors are busy these days answering client concerns as investors eye the upcoming midterm elections with caution, considering factors that might negatively affect stock prices. In fact, Sheaff Brock Managing Director Dave Gilreath pointed out in a recent Knowledge Builder presentation, midterm elections have been inflection points for equity markets in the past, regardless of which party won or lost!

The Midterm Elections | Average S&P 500 Performance History | Sheaff Brock Institutional

True, Gilreath admits, there has always been a correction during a midterm year, but the interesting thing is that the “snapback” in the twelve months following each midterm correction has been significant. Typically, there has been a “choppy” summer preceding the election, followed by the market taking off in an upwards direction in the fall following the election. In fact, the S&P 500 has not ever declined in the twelve months following the last 17 midterm election seasons since 1950! The average S&P return in the 12-month period following the last 17 midterm elections has been an impressive 15.3%.

Midterm Elections and the S&P 500 Price Return | Sheaff Brock

“Market dynamics over the next 12 to 18 months are a no-pain, no-gain situation,” says MarketWatch. “The pain comes in the form of market weakness as the midterm elections approach, to be followed by a strong rally. Without the first, we don’t get the second.”

CNBC’s Market Insider agrees, stating that post-election history is on the side of the bulls. “There’s a reason why investors salivate when midterm elections cycle through,” Dominic Chu observes. “It’s been a very bullish catalyst for the markets, and has been for decades.” Chu notes that even in the worst-performing post-midterm election spans, the index rose, including the year following Black Monday in 1987!

With the economy still growing, leading indicators good, and corporate earnings hitting all time highs, Gilreath views the to-be-expected midterm-election-year correction as nothing less than a stock buying opportunity!


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