Stock Market Selloff May Ease After Midterms, History Suggests
Historical data shows the S&P 500 averages 15.5% gains in the nine months following Election Day, offering hope to rattled investors.
Investors rattled by the current stock-market selloff may find relief on the other side of the midterm elections, regardless of which party gains ground on Capitol Hill, according to historical market data reviewed by MarketWatch.
Since 1950, the S&P 500 has delivered an average return of 15.5% during the nine-month stretch running from Election Day through June 30 of the following year. That consistent post-election bounce has held across a wide range of political outcomes, suggesting the market's recovery is driven less by partisan results than by the simple removal of electoral uncertainty.
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The pattern points to a well-documented phenomenon in market behavior: investors tend to price in risk during periods of political ambiguity, then reallocate more aggressively once the outcome is known. With midterms historically producing divided government more often than not, the data implies that gridlock itself may actually provide markets with a degree of comfort, limiting the scope of sweeping legislative changes that could disrupt corporate earnings outlooks.
For everyday investors tempted to move to cash ahead of Election Day, the long-run record serves as a cautionary counterargument. Exiting the market ahead of a historically strong seasonal window carries its own risks, particularly when inflation and Federal Reserve policy are already creating headwinds that could amplify any missed upside.
Whether this cycle matches its historical precedent remains to be seen, but the weight of seven decades of data offers a compelling case for patience. Continue reading at MarketWatch.com.
