How Midterm Elections Affect the Stock Market
Imagine if you knew an investment strategy where the historical odds are almost 100% in your favor! 😀 Well here’s how. 🙂 Since 1942 there has been 18 midterm elections, not counting the one that just happened earlier this week. Every single time the S&P 500 has gone up after one year following each of those elections. The average stock market gain over the 12 month period following all 18 elections was 16%. 🙂 If we only look at what happened after just 6 months following the midterm elections, once again 18 out of 18 times the S&P 500 rallied, and on average by 15%. Chart below for details. (source)
As we can see, the chart shows the percentage change of the stock market index after 3 months, 6 months, and 12 months following each midterm election. The only negative change is after the 3 month period following the 2002 midterm when the S&P 500 dropped 8.7% as shown in brackets. Every other time the stock market has gone up. 🙂 This indicator has been very consistent because regardless of which party wins in the house or the senate the results of a midterm election adds certainty to the political landscape. And certainty gives confidence to the financial markets. 🙂
The rally after a midterm election is probably one of the most certain, long term technical indicators ever documented with nearly a perfect track record of being right every time. We’d have to venture back to the great depression era for this indicator to not deliver positive results.
This appears to be a great opportunity that only comes once every four years so I decided to try my luck. Earlier this morning I invested $1,110 into the stock market index. 🙂 The plan here is simple. Wait 6 to 12 months and then sell it for a profit. 😀 If this strategy would have worked in the past 18 out of 18 times, then I’m betting my money that it will also work this 19th time. 😉 Normally I’d use more money on an investment with such great odds. But since I can’t use leverage to buy new investments until next year I’m limited by my cash savings at the moment, lol.
As usual I’m not giving out investment advice or stock tips. I just want to point out the compelling historical data. 🙂 Personally I bought 6 units of the Vanguard S&P 500 ETF (symbol: VOO) at $185 each. I chose this fund because of the low 0.05% MER and high trading volume. But other index funds to consider are SPY, and VTI.
Possible risk: A small chance the world could enter into a depression, or for some other reason the stock market could plummet in the short to medium term and I could lose up to 50% of my investment.
Random Useless Fact:
An 11 year old cat named Banye has a black patch of fur on his chin. From a distance this makes him look like he’s in a perpetual state of surprise.