The S&P 500 presently sits 9% below its January high — still less than the 14% average intra-year decline since 1980 (reference chart here).
Strategas Research notes that in mid-term election years since 1962, stocks have fallen even more — an average of 18% (chart). However, Strategas notes that stocks are, “up one year later from the low every time since 1962 and by an average of 36 percent. The S&P 500 has not declined in the 12 months following a midterm election since 1946.”
Strategas says stocks often perform well after mid-terms because, “The president usually loses seats in his first midterm election. Knowing something needs to change before the presidents own reelection, we usually see a large fiscal policy package put on the table. Equity markets price in this stimulus in year three of the presidential cycle and the president benefits from the growth effects in his reelection year.”
Whether this will be true again or if Strategas just jinxed things, we don’t know. Even so, it is good to know that that what feels in some ways like an unprecedented environment is in other ways par for the course.
Data source: Strategas Research
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