Critical stock market lows are likely still ahead, according to historical trends in midterm election years, a sentiment echoed by Lansing Street Advisors and highlighted in a recent MarketWatch report. Since 1950, every midterm election year has seen a significant U.S. stock market correction, a pattern that suggests the current downturn may not have reached its nadir.
Lansing Street Advisors, an Ambler, Pennsylvania-based registered investment advisor founded in April 2020 by CEO Matthew Topley, offers comprehensive wealth management and financial planning services. These include investment consulting, tax and estate planning, retirement strategies, and education savings. As of December 31, 2023, the firm managed over $346 million in discretionary assets and more than $32 million in non-discretionary assets, serving 339 clients with a team of four financial advisors, including Michael Topley.
Midterm Volatility: A Historical Reality
Midterm election years have consistently been associated with lower stock market returns and increased volatility compared to non-election years. This trend is often attributed to the heightened political uncertainty surrounding electoral outcomes and the future composition of Congress. Data from Capital Group, analyzing S&P 500 Index returns since 1930, illustrates that stocks tend to generate lower average returns and make little headway in the initial months of midterm election years, often until just before Election Day.
“Historically, midterm election years have shown a tendency for the stock market to deliver lower returns and experience higher volatility compared to non-election years.”
The Post-Election Rebound: A Silver Lining
Despite the initial turbulence, there’s a compelling historical silver lining for investors: markets have consistently tended to rebound strongly after Election Day. Since 1950, the S&P 500 has delivered an impressive average one-year return of 15.4% following a midterm election. This figure is nearly double the return observed in all other years during the same period. Remarkably, the S&P 500 has not recorded a single negative one-year return after any midterm election since 1950. Even if the market experiences immediate choppiness post-vote, in every election since 1962, the market was up six and twelve months later, irrespective of the election’s outcome or the party controlling Congress. These critical stock market lows are often followed by strong recovery periods.
Navigating Future Market Swings
While the immediate future might hold further market corrections, the historical data offers a strong case for long-term optimism. Investors should consider the potential for short-term volatility in the lead-up to midterm elections, but also recognize the consistent post-election recovery trend. Understanding these cyclical patterns can help in making informed decisions about wealth management and investment consulting strategies. For more insights into market trends, explore our related Finance news.
The historical data strongly suggests that while we may not have seen the absolute bottom yet, the period following the midterm elections typically presents a robust opportunity for market recovery. Prudent financial planning and a long-term perspective remain essential for navigating these anticipated market swings.
