Along with traditional seasonal trends, market observers are also giddy over midterm elections, anticipating a bounce after Election Day. Specifically, strategists argue that ahead of midterm elections, investors dump stock positions due to the uncertainty, but then equities take off. Since 1934, historic data has shown that the Dow only declined four times between Election Day and year-end in the 20 midterm election years.
Additionally, with the Republicans poised to expand their house majority in the midterm elections, Samuel Stovall, equity strategist at S&P Capital IQ, points out that markets advanced in 110 of 114 years when both houses of Congress were controlled by the same party.
“Even better, investors may have forgotten that the combination of a Democratic president and a unified Republican Congress has been accompanied by the best average performance for the S&P 500 since 1945, as the S&P 500 rose an average 15.1 percent in the eight times since 1945 in which a Democratic President has been opposed by a Republican-controlled Congress,” Stovall said in a note.
SPDR S&P 500 ETF
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Tom Lydon’s clients own shares of IWM, QQQ and SPY.