Fidelity research says the S&P 500 posted positive returns in the 12 months after U.S. midterm elections 95% of the time since 1938. Motley Fool columnist Geoffrey Seiler recommends staying invested, but cautions that past performance does not assure future results.
Since 1950, stocks averaged annual returns of 14.5% in year three of the presidential cycle, after midterms, compared with 4.9% in year two; year two was positive in 55% of 12-month periods. Year four averaged 9.1% and was positive 72% of the time. Cantor Fitzgerald says the market fell 5% or more in September in 15 of 24 midterm years since 1930; Carson Group says October and November averaged gains of 3% and 2.7% in midterm years.
Seiler says the historical sample is small. He acknowledges that valuation measures such as the CAPE ratio and Buffett indicator suggest high S&P 500 valuations, but argues the index is now dominated by large technology companies. He names Vanguard S&P 500 ETF (VOO) and Invesco QQQ Trust (QQQ) as core holdings.
