Left Wing, Right Wing, Buffalo Wings - November 7, 2018
We’re shifting from the election to post-election commentary.
For investors, how do stocks perform in the wake of a midterm? While there’s no guarantee stocks will adhere to the historical pattern, the news is encouraging.
There have been 18 midterm elections since 1946, and stocks have gained ground all 18 times in the 12 months that followed (RiskHedge).
Average advance – 17%, easily outperforming the remaining three years.
Measured from the yearly midterm low, stocks tacked on an average 32%.
Stocks typically underperformed leading up to the election: average dip of 1%.
Measuring from the October low to yearend, the S&P 500 Index2 has averaged an advance of (since 1946 and subsequent midterm years)—
10.6%, or a range of 1.5 – 18.0% (LPL Research).
Many pressing issues face voters outside the investing arena so choose wisely.
From an investment perspective, a disciplined approach that avoids the ‘noise’ that can trip up a long-term investor has historically been the best path.
When it comes to politics and stocks, I’ll leave you with this remark from legendary investor Warren Buffett.
“If you mix your politics with your investment decisions, you’re making a big mistake.”