Midterms and Markets

Midterm elections have been front and center this week, and we know from exit polls that voters were concerned with inflation and a relative loss of purchasing power. The consumer price index measures inflation and is at a 40-year high year-over-year.

Mid-term elections can signal a change in government spending, tax plans, and priorities broadly. But, regardless of which political party holds the reigns, investors generally have a greater sense of clarity post-vote.

Over the past 75 years, markets performed better in the 12 months following an election than in the 12 months prior. This correlation happened in 17 of the last 19 midterms.

Is this time different?

The daily headlines—inflation, bull, bear, recession, elections—change, but the overall historical growth trend has remained intact when viewed over the long term.

A continuous upward-sloping line from point A to B would be ideal. Predictable, if nothing else. But unfortunately, these steady conditions rarely exist int the short term. Uncertainty and surprises are a part of life, the market, and the economy. We plan for this.

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