As often as I say I can't predict the future, most clients still want to know what I think will happen. So here it is:
No matter who wins the midterm elections on November 3rd, your investments will probably be okay.
Here are a few charts to make the case:
The S&P 500 has been higher from every midterm election to the next June since 1950. The average return is over 15%.
Streaks eventually end, and markets can fall for reasons entirely unrelated to election outcomes. But nothing in the recent historical record suggests midterm elections hurt the stock market.
The Fourth Quarter Returns Have Been Historically Strong In Midterm Years
Building on the first point, 4th-quarter (October through December) returns in midterm election years have historically been the highest of any quarter in the four-year election cycle.
But What If I’m Wrong & The Market Pulls Back?
Even if the stock market goes down after the midterms, I suspect things will still work out for those who don’t panic. Stock declines, even large, scary declines, happen all the time. Over the last few years, we’ve had surprising inflation, wars, and tariff announcements, and the secret to navigating it all has been to ignore it rather than try to predict it.
This Doesn’t Feel Like a Bubble
The green diamonds in this chart show the 10-year average price-to-earnings ratio for different S&P 500 sectors. Many of today’s hottest sectors, like tech and energy, trade below those averages, while the S&P 500 as a whole is right in line. These numbers aren’t indicative of arbitrarily high valuations.
Bonus Chart – Nvidia Doesn’t Look Like a Bubble Either
With all the talk of an AI bubble, Nvidia is now the world’s largest company and generates income well above the next-largest company, Apple. Future earnings may collapse, and valuations may plummet as a result, but nothing about this chart reminds me of the dot-com era.
Personal Note:
Last weekend we attended my sister-in-law’s Victorian Gothic-themed party, so this look is now doing double duty as my Halloween costume.
The terrible black wig is a nice reminder that I’m probably better off without hair.
Thanks for including the charts as rhey were very informative. I'll keep my fingers crossed as the election is next week & we'll see what happens.
I agree - you look better without the black wig 🤣🤣🤣