After the brutal September, the markets recovered some of the year-to-date (YTD) losses. The Nasdaq gained
4% over the past month, bringing its YTD loss to (30.1%). The S&P 500 gained 7.99% bringing its YTD return to
(18.76%) and the Dow gained 13.95% bringing its YTD returns to (9.92%).
How will the midterm elections affect the market? The correlation between stock market performance and
midterm elections is well documented. In 17 of the 19 midterms since 1946, the market performed better in the
six months following an election than it did in the six months leading up to it.
So, with the upcoming midterms on November 8, can investors expect similarly strong post-election
performance well into next spring?
Wait a minute says Liz Ann Sonders! By-the-way, Liz Ann Sonders is one my favorite investment strategist.
While she isn’t always correct, she is not a hipster trying to get her 15 seconds of fame in front of the television.
Over the years I have found her to be very solid in her thought processes and she brings a lot of data into her
“Post-election outperformance is often driven by the market’s expectation of increased government spending
from a new Congress,” says Liz Ann Sonders, Schwab’s chief investment strategist. “But an additional infusion of
funds seems unlikely this year, given the government’s historic levels of spending and stimulus in response to
the pandemic.” In fact, all that money is one contributor to the 40-year high in inflation, and any new spending
would likely exacerbate the issue.
“The combination of high inflation, the war in Ukraine, and a lingering pandemic has already made this cycle
unlike prior midterm years,” Liz Ann says. “With so many other forces at play in the market, I wouldn’t put much
weight in historical midterm-year performance.”
If you think our elections now days are crazy, have you heard the story of the candidate who ran for president
from prison? Eugene V. Debs was a five-time Socialist Party candidate for president in the early 1900s. During
the First World War, Debs publicly railed against the war and he military draft. He was jailed in 1918 for his
continued agitation against the government. Two years later, Debs made his fifth and final run, this time from
federal prison. He lost, but still garnered over 900,000 votes.
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