Look for a Market Bounce After the Midterms

By Steve Dinnen

If you’re wondering when the market might finally shed its losing streak, mark your calendar for Nov. 9, the day after the election. If data analysts at U.S. Bank crunched their numbers right and history holds true, we’re about to see a positive return in stocks within six months of this year’s midterm election.

This has happened every four years since 1962. And you’d have to go all the way back to 1939 to see the last time the S&P Index posted negative returns in the 12 months after a midterm vote. S&P rising performance ranged from a low of 3% in the year after the 2010 elections to 30.9% in 1962. The average lift was 16.3%, double historic norms.

On the flip side, U.S. Bank said the S&P 500 Index has historically underperformed in the year leading up to midterm elections. The average annual return of the S&P 500 in the 12 months prior to a midterm election is 0.3%.

One factor behind this reversal of fortunes might be policy uncertainty. Without knowing which political party will hold majorities in Congress, it’s unclear which social and economic policies will take priority. This uncertainty resolves after the midterms. Note: It doesn’t matter whether a Democrat or Republican is in charge.

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