The midterm elections are two weeks away. One-third of the Senate and every Congressperson faces re-election. The current balance of power in both chambers is at stake and the races have captured the attention of many. Regardless of your political beliefs, many of our clients want to know what impact elections have on the stock market. We have some data. And pictures. That's what we are talking about this week on Wealth Wednesday.
Watch Now: Midterm Elections and the Stock Market
- 0:00 – Intro
- 0:26 – Welcome, please subscribe
- 1:00 – Stock Market performance under different presidents
- 2:31 – The “third year phenomenon”
- 4:30 – What does all of this mean for this year.
- 5:31 – Economics and fundamentals don’t change when the election is over.
- 6:26 – Final thoughts
- 9:20 - Outro
Just a reminder, the data is non-partisan. And past performance does not predict the future.
Is Red or Blue Better for Stocks?
How has the market done when a Democrat occupies the White House? What about a Republican? We look back to when Harry Truman won his first election.
What Has Happened After the Mid Terms?
The Year Three Phenomenon
Since Truman was elected, the third year of a presidential term has been positive. On average it has been the best year of a president's term. Next year is the third year of Joe Biden's first term. Here is what has happened in the past.
Right after the Mid-Term Elections
Since 1970, the 8-month period after the mid-terms—November through June—has produced the best results. The average return over that period has been 18.77%. The next 12 months haven't been bad either.
What does it mean for this year?
It means absolutely nothing. The mid-term elections and the third year of President Biden's term still face the challenges of higher inflation, a slowing economy and higher interest rates. Nobody knows what impact that will have on the stock market. Like everything else, these patterns look interesting until they don't. Next year could fit the pattern, as could the next 8 months. But you shouldn't make a major investment strategy from the historical data.
Connect with a planner.
Appearing in This Video
Nikki Lude, CFP®
Nikki is a Certified Financial Planner™ in Woodsfield, Ohio. She has been helping people plan for almost 20 years.
Andy is a financial consultant in Parkersburg, WV. Andy joined our team in 2018.
Neal Watson, CFP®
Neal is a CFP® Professional in Marietta, Ohio. He began his career as a financial planner in 1996.