Mid-term Elections and the Markets
The purpose of this blog is to illustrate the behavior of Markets during past mid-term election years. Remember, we do not “under any circumstances” attempt to predict market behavior; this we believe is a futile!
It appears that there is never a shortage of the “doom and gloom” stock market prognosticators. For the better part of 5 years now, they all hold one thing in common; they have been consistently wrong about the direction of financial markets and have misled investors. (They can all praise themselves for that). Election years are not uncommon to heightened volatility and additional speculation about where markets are headed, this year is no different. The chart below provides historical price movement of the Dow during election years.
"Today’s chart illustrates how the stock market has performed during the average mid-term election year. Since 1950, the first nine months of the average mid-term election year have tended to be subpar (see thick blue line). That subpar performance was then followed by a significant year-end rally. One theory to support this behavior is that investors abhor uncertainty. To that end, investors tend to pull back prior to an election when the outcome is unknown. Beginning in early October, however, the outcome of the election becomes increasingly apparent and investors respond by positioning their portfolios accordingly." *
*Source: Chart of the Day: Thursday, December 26th, 2013 (http://pragcap.com/chart-of-the-day-market-performance-in-mid-term-elect...)
