Since World War II began, there have been 20 Midterm Elections (MTE) years in the United States. In every time period from the MTE to June 30th of the subsequent year, the market has been higher. A perfect 20/20. The bulk (13) have generated double digit results. So, what does that tell us? Well, the first is that the market hates uncertainty. Once clarity is provided, regardless of the outcome, the market responds accordingly and historically that response has been positive. Second, much like oil and water, your political views and investment views should never overlap. Lastly, past performance is not indicative of future results.
While it’s tempting to speculate which party or parties will control the House and Senate after the 2022 midterm elections, the midterm elections shouldn’t have a significant impact on your investment portfolio or the investment strategy developed in partnership with your financial professional. U.S. fiscal policy may change after the 2022 midterms, but it’s economic fundamentals, not election results, that historically play the greatest role in equity market performance both before and after midterm elections. The chart below provides a basic illustration for the possible outcomes and likely policy result.
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