After Those Midterm Elections
History has a way of repeating itself and in this case the historical data could provide some comfort for investors with money invested in the S&P 500 or other equity-based indices. Calendar years following midterm elections have yielded some insightful information. Since 1935, the year after the midterm election in 1934, the S&P 500 has averaged nearly 20 percent for calendar years following midterm elections through 2019. No matter what your investment strategy, if it involves buying stocks then 2023 has a chance to be a positive year for those willing to stick with equities in the coming year. Of course, what happened historically does not have to repeat itself in the coming year, however the data does offer a road map for what investors might expect in the coming year.
Looking at more detail surrounding those returns, since 1934 there has only been one year, 1939, in which returns have been negative in the calendar year following a midterm election. The return during 1939 was negative .41 percent which was slightly in the red. In fact, starting with 1943, all calendar years following midterm elections have produced positive returns with the average return through 2019 being 19.56 percent which is significantly above the historical average return for the S&P 500. Furthermore, since 1934, returns in the calendar year after the midterm elections produced average returns that more than doubled the return on investments made during the midterm election year itself. What can we expect in 2023? Based on historical data since 1935, the odds say that the S&P 500 will generate a positive return in the coming year after a midterm election as it has done 95.45 percent of the time through 2019.
Given what we know about history and investing in the S&P 500, investors are likely to experience something positive in 2023. Unfortunately, investors often lose sight of the fact that markets are biased toward the long-term investor which is ultimately what all investors are in the grand scheme of things. Tune out the noise from the financial pundits and focus on building your wealth with sound investment strategies that rely on investment fundamentals. We expect those individuals and organizations with the specialized skills in building portfolios that produce returns superior to the market averages are likely to see even higher returns beyond their strategies historical average return.
At Investoristics, our strategy has outperformed the S&P 500 by over 12 percent on average in the years following midterm elections since 2003. Our approach has also maintained significantly higher returns than the S&P 500 over the last 20 years with lower market risk. Good things seem in store for the coming calendar year, especially for those investors who have the ability to find stocks within the overall market that have characteristics that are indicative of future outperformance vs the indices. If you want a passing grade on your after-midterm-year investment holdings and to exceed the average return experienced by investing in an inferior investment strategy, then contact us at your earliest convenience to take advantage of our expertise.
