Can Midterm Elections Move Markets?
Election day is finally upon us. After all of the campaigning, all of the ads, all of the rhetoric, and all of the signs in everyone’s yards, it’s finally time to vote for the candidates of our choice across the country. It will be a relief for many of us to have this behind us and move on from it, but no one more so than Mr. Market. There is one thing that the markets dislike more than anything else, and that is uncertainty. Lately, the headlines have been all about uncertainty about interest rates, uncertainty about tariffs and trade wars, and uncertainty about which political party will be in control of the House and the Senate.
The latter of these items will be in the rearview mirror when we wake up tomorrow morning. History has shown that the President’s party typically loses seats in Congress, but either way, depending on who wins, does it mean anything in regards to the future performance of stocks? In the short term, it can have some effect, as volatility is typically elevated in midterm election years. In the long term, however, history has shown that companies have been able to adjust to the changing regulatory and political landscape. Past performance is not indicative of future results, but it is interesting to note that going back to 1950, the S&P 500 has never had a negative year following the midterm elections. Will the next 365 days follow suit? We shall see.
Attached below is a great piece written by the Capital Group that discusses the history of midterm elections, and what, if anything, it means for the equity markets in the year ahead. We hope you enjoy the read, and as always, please call us if you have any questions or if there is anything we can do for you.