It’s easy for investors to be pessimistic with how stocks have performed this year. Investors have been worried about inflation, the war, the economy, and more. Now we have midterm elections which have historically been a volatile period for stocks.
Before you panic and want to sell everything, it’s worth considering this bullish catalyst. Stocks have historically done quite well in the six months following the midterms. As you can see in the chart, the stock market is higher six months after the election every year since 1950.
Why is that the case? Likely because markets hate uncertainty and there is a lot of that leading up to the election. Once the election is over some uncertainty is lifted. This year’s midterms could provide a nice tailwind for US stocks.
There is always the chance that 2022 breaks the trend. After all there is no shortage of macro concerns. Inflation is too high and the job market is showing signs of slowing.
That said, further downturns can be an opportunity for net savers. The stock market has usually bottomed about six months before the economy (Source Forbes).
Putting your money to work when stocks are at all-time highs feels more comfortable, but the real money is made by putting your savings into the market when stocks are falling.
Please continue to follow our blog as we continue to break down all the latest trends in the world of finance.
Disclaimer / Sources
Stock Market performance following midterm elections data from YCharts.
Stocks bottom before the economy from Forbes.
Please consult your financial advisor regarding your specific situation. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax advice.
All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.