Midterm Elections Effect on the Stock Market
November 3, 2022
Midterm elections obviously have an impact on our nation’s political climate, but have you ever wondered what impact they have on our economy? This year has already been a rollercoaster for the stock market as the longest running bull market came to an end, leaving many concerned about what the future may hold.
While we can’t predict the future, we can learn a lot from history, which tells us to be optimistic in this case. Check out the following statistics:
- “U.S. stocks have consistently earned positive returns after previous midterms and delivered average annual returns of 18.6% compared to 10.6% in all other years.”1
- The stock market experienced positive returns in 12 out of the past 18 midterm election cycles.1
- “If we lookout two years after previous midterm elections, the average return has been a blistering 33.7%.”1
This is all good news for investors, but you’re probably wondering why midterm elections have this impact on the market. While no one knows the exact reason, one theory states “there’s a tendency for more gridlock in Washington following midterms. Investors think gridlock is good because it means less legislative risk. And anytime there’s less macro uncertainty, it boosts investor sentiment.”1
While we wait to see the results of this election cycle, remember that we are here to answer your financial questions and help you prepare with a tailored financial strategy. To learn more, please contact us to ask any questions or schedule a complimentary consultation. We look forward to helping you!