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Midterms near, but market history points to gains after election results
According to LPL Financial, the S&P 500 has risen in each of the last 18 post-midterm periods, averaging an 18.2% return, with uncertainty typically fading once outcomes are known.
With the US midterm elections about four months away, strategists say the political fight in Washington could spill into markets because Congress controls what policies the Trump administration can advance, depending on whether Democrats and Republicans win the Senate and House.
Yahoo Finance cites Jeff Buchbinder, chief equity strategist at LPL Financial, who argued that investors may be better served by watching market behavior than making political predictions. He noted that midterm years historically align with the weakest equity performance in the four-year presidential cycle, with growth averaging 4.6% and stocks seeing the largest average drawdowns and the highest realized volatility.
Buchbinder added that the period after the vote has tended to look stronger, with the 12 months after midterms, the so-called pre-election year, showing the highest annual growth. Going back to 1954, he said the S&P 500 has gained in every one of the last 18 post-midterm periods, averaging 18.2%, reflecting a pattern where uncertainty peaks ahead of the election and then fades once results are known.
He also said a base-case scenario of split Congress would likely mean fewer sweeping legislative changes, but more volatility around issues such as government funding and the debt ceiling, while attention shifts toward what the White House can accomplish through executive order and regulators if major bills become harder to pass.
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