The 2022 Mid-term Elections will feature hundreds of contested races at the state and local levels. These elections will decide whether the Democrats maintain – or the Republicans gain – control of Congress. Irrespective of what the polls suggest will happen, let’s explore what impacts the 2022 Mid-terms might have on U.S stock markets.
Mark November 8th on Your Calendar
The 2022 Midterm elections will be on Tuesday, November 8th. History suggests that the period after the mid-terms is more positive for markets, regardless of which party wins. Of course, past performance is no guarantee of future results – ever.
As the chart shows, in the twelve months prior to midterm election day, market performance is volatile, sideways, and often down – somewhat similar to what we’ve seen so far this year. However, in the year after midterms, market returns are positive, on average by about 15% – and it doesn’t matter which party is in control.
Historical Performance
First off, investors need to remember this: Past Performance is No Guarantee of Future Results. Ever.
But, consider this from Standard & Poor’s:
- Since 1900, the S&P 500 Index has risen by an annualized 7.5% when one party held the White House and both houses of Congress
- The S&P 500 Index gained an annualized 6.7% when Congress was unified, but the president was from the other party
- The S&P 500 has risen an annualized 6.2% when Congress was divided
However, Standard & Poor’s also suggests that the gap has increased recently and reports the following:
- Since 1945, the S&P 500 has returned an annualized 11.0% when the same party controlled the White House and both houses of Congress
- The S&P 500 Index gained an annualized 7.4% when one party held Congress and the other party held the White House
- The S&P 500 Index has risen 6.9% annualized when Congress was divided
But here is what might have stock market followers worried: the worst stock market returns have come when the president is a Republican and Congress is divided. Since 1900, the S&P has gained a meager annualized 3.2% during those time periods. But again, Past Performance is No Guarantee of Future Results.
One More Thing
Of all the data and statistics about the economy and markets, this is one of the more startling:
- Approximately 60% of the voting-eligible population votes during presidential election years and;
- Only 40% vote during midterm elections.
Irrespective of one’s political views, the fact remains that robust voter turnout is one of the most fundamental cornerstones of a healthy democracy. Please vote.
