Article Takeaway: What should investors know about midterm elections and the stock market?
Midterm elections can contribute to short-term market volatility, but history suggests election outcomes are not a reliable reason to make major portfolio changes. Investors are generally better served by staying focused on their long-term financial goals, diversification, risk tolerance, and time horizon rather than trying to predict how markets will respond to a particular political outcome.
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Midterm elections can create short-term market uncertainty, but election results alone are not a reliable reason to change an investment strategy.
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Historically, U.S. stocks have often performed well after midterm elections. Since 1938, the S&P 500 has posted gains in the 12 months following midterms 95% of the time, although past performance does not predict future results.
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Politics is only one factor influencing the stock market. Inflation, interest rates, corporate earnings, geopolitical events, technology trends, and investor expectations can quickly overshadow election results.
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Trying to time the market around elections can work against long-term investment goals. A diversified portfolio built around an investor's goals, risk tolerance, and time horizon should generally account for periods of political and market uncertainty.
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The election may change Washington, but it doesn't necessarily need to change your portfolio. Investors should evaluate their financial plan based on their personal circumstances and long-term objectives rather than short-term political headlines.
Full Article
It’s been a turbulent fall for investors. Concerns about persistently high prices, growing skepticism about tech companies’ AI spending and questions about the U.S. war with Iran have all contributed to an uncertain investment outlook. But the biggest headlines in recent weeks have been around the midterm elections, with a seemingly endless stream of commentary about what outcomes might mean for the market.
With the elections behind us, we can all look forward to fewer campaign-related texts. And with the results in, you may be wondering what comes next and what it might mean for your investment strategy.
History can offer us some perspective, but the best approach to investing remains the same: focus on your long-term goals rather than trying to anticipate what the market might do in the short term.
What History Tells Us
There's a lot of conventional wisdom about midterm elections and the stock market. Historically, the months leading up to midterms have earned a reputation for making investors uneasy. Stocks have often experienced greater volatility as Election Day approaches, reflecting uncertainty about potential changes in government policies and priorities. Average annual U.S. stock market returns have historically been weaker in midterm election years, rising about 7.5%, compared with 12.4% in non-midterm years.
However, since 1938, the S&P 500 has posted gains in the 12 months following midterm elections 95% of the time, regardless of who wins.
Of course, these are historical averages, not predictions. Every election takes place against a different economic backdrop, and many other factors influence stock prices.
Action After the Elections?
Going into Election Day, the stock market was strong, with the S&P 500 posting a 10.5% year-to-date return through October. On Wednesday, November 4, the day after the election, the S&P 500 rose 1.6% as the markets appeared to breathe a sigh of relief now that the outcomes were clear.
The results of the election brought a significant shift in Washington. Democrats won control of both the House and Senate, while a Republican remains in the Oval Office for two more years. That creates a divided government that might make it more difficult for Congress to get much done. Historically, that kind of political gridlock has sometimes been viewed favorably by the market as it can limit major policy changes.
On November 5, the S&P 500 posted its worst daily decline in a year, as investors continued to question whether investments in AI and data-center infrastructure will generate sufficient returns.
The sharp reversal is a useful reminder of how difficult it is to predict the market's next move. Even as one event appears to remove uncertainty, other concerns can quickly take center stage.
Keeping Your Portfolio on Track
While the election may have changed the political landscape, it hasn't changed a fundamental pillar of long-term investing: Avoid making major investment decisions based on the latest headlines. Whether you're pleased or disappointed with the election results, changing your investments in response to a particular party's gains or losses can be costly.
Instead, stay focused on your long-term goals. The past 100 years have included dozens of election cycles, political shifts, economic expansions and recessions, wars and other unexpected events. Through it all, the stock market has trended upward over the long term. Markets have historically rewarded investors who stayed invested, despite the bumps along the way.
Your financial plan was built with uncertainty in mind. You don't need to overhaul it every time the political landscape changes or the market has a difficult week. What matters is having a strategy designed to carry you toward your goals—and giving it the time needed to work.
If the election results or recent market volatility have you questioning your investments, please reach out. Together, we can assess whether any adjustments are warranted and make sure your portfolio remains focused on what really matters: your goals for today and in the years to come.
Multnomah Group is a registered investment adviser registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Multnomah Group does not provide legal or tax advice.