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OffbeatOpinion: This is what’s happened to stocks after every midterm election since World War II

10:05  06 november  2018
10:05  06 november  2018 Source:   marketwatch.com

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LIVE: Follow MarketWatch’ s analysis of midterm election results. This is causing big-time anxiety for investors who’ve enjoyed the 28% stock market rally since Trump took office. No matter what you think of Trump, his reign as president has been great for stocks . But as the election has drawn closer

This is what ’ s happened to stocks after every midterm election since World War II . Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.

Opinion: This is what’s happened to stocks after every midterm election since World War II Unlce Sam wants you ... to invest.

The opinions in this article are the author's, as published by our content partner, and do not necessarily represent the views of MSN or Microsoft.

Are you prepared for Tuesday? It’s going to be a crucial day for the stock market.

If the polls are correct, President Trump and Republicans are in big trouble. There’s an 85% chance Democrats will seize control of the House of Representatives from Republicans, according to statistical analysis firm FiveThirtyEight.

This is causing big-time anxiety for investors who’ve enjoyed the 28% stock market rally since Trump took office. No matter what you think of Trump, his reign as president has been great for stocks. But as the election has drawn closer, the market has fallen apart.

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My Team Studied Every Midterm Election Since World War II . I was surprised by what we found. It turns out there’ s a shockingly easy way to Here’ s what we found… Since 1946, there have been 18 midterm elections . US Stocks Have Climbed Higher in the Next 12 months After Every Single One.

So what could happen this month — and the months ahead? First, few topics stir emotion in So let’ s steer clear of opinion and emotion. Instead, I want to focus solely on the facts that are Since 1946, there have been 18 midterm elections . Stocks were higher 12 months after every single one.

The S&P 500 Index (SPX) closed out October for a 7% monthly drop, nearly its worst month since the financial crisis. So what could happen this month — and the months ahead?

First, few topics stir emotion in America like politics. Many perfectly reasonable people lose the ability to think straight when they hear the name “Trump.” As I always said at RiskHedge, politics and investing do not mix. Investor Warren Buffett often says: “If you mix politics and investing, you’re making a big mistake.”

So let’s steer clear of opinion and emotion. Instead, I want to focus solely on the facts that are relevant to you as an investor. As you’ll see, you don’t need to waste even one second worrying about which party will win on Tuesday. I was surprised by what we found.

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Midterm election outcome could be 'glowing good news' or 'disaster' for markets When the polls close Tuesday night, stock strategists expect to see a Republican Senate and a Democratic House — and a still bullish scenario for stocks. That's because a split Congress would cause old-fashioned gridlock, viewed as a positive by markets as Congressional efforts to enact or reverse legislation are stymied. Bank of America Merrill Lynch says the best S&P 500 returns under a Republican president o ccurred while Congress was split, a scenario that generated 12 percent annual returns.

Since 1946, there have been 18 midterm elections . Stocks were higher 12 months after every single one. Leading up to midterms , U. S . stocks typically perform poorly. From January to October in midterm years, they drop an average of roughly 1%. In all other years, stocks rise roughly 7% in that

And with the midterm elections looming, it may be difficult to think clearly about anything else. So here’ s a tidbit that may be diverting and even Remarkably, this has been true for every midterm election since World War II . The data shows that it hasn’t mattered who won or lost or which party

Since 1946, there have been 18 midterm elections. Stocks were higher 12 months after every single one. Every single one. That’s 18 for 18. Even though we’ve had every possible political combination in the past 72 years. Republican president with Democratic Congress. Democratic president with Republican Congress. Republican president and Congress. Democratic president and Congress.

Since 1946, stocks have risen an average of 17% in the year after a midterm. And if you measure from the yearly midterm lows, the results are even better. From their lows, stocks jumped an average of 32% over the next 12 months. For perspective, that’s more than double the average performance for stocks in all years. We’re also entering the third year of a presidential term, which is historically the strongest year for stocks.

Take a look at this chart. You can see that the performance of stocks in the third year of a presidential term beats all other years by a long shot:

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US stocks set to open mixed as midterm elections approach U.S. stock futures traded mixed on Tuesday as voters are set to head to the polls for midterm election which could send ripples throughout capital markets. require(["medianetNativeAdOnArticle"], function (medianetNativeAdOnArticle) { medianetNativeAdOnArticle.getMedianetNativeAds(true); }); As of 4:00 a.m. ET, Dow futures were down by 2 points, but indicated a slightly higher open of 17 points. Meanwhile, S&P 500 and Nasdaq futures traded mildly lower.

What ’ s driving the market? Midterm elections , which are expected to see Democrats take control of the House and Republicans maintain their grip on the Senate, are under way, and the results Read: Opinion : This is what ’ s happened to stocks after every midterm election since World War II .

Stocks have risen a year after 18 midterm elections since World War II , with the S &P 500 delivering an average return of 14.5 percent, according to LPL Financial Research. "With the S &P 500 up only 1.3 percent since the midterm election last November, there indeed could still be room for stocks to run

Opinion: This is what’s happened to stocks after every midterm election since World War II© RiskHedge

Look at the chart above, and you’ll notice the second year of the presidential cycle is typically the worst for stocks. That’s the year we’re in right now — the year when midterms occur.

There’s one last important point you should know. Leading up to midterms, U.S. stocks typically perform poorly. From January to October in midterm years, they drop an average of roughly 1%. In all other years, stocks rise roughly 7% in that time frame.

Think of midterm elections like a thick fog covering markets. They obscure what the political situation will look like in the near future. Unable to see what’s coming, investors get nervous and act cautiously. Just as they would slow down while driving a car through a thick fog. Once the election concludes and the fog clears, investors regain confidence and the market gets back on track. This year is following that script to a T.

For all the market’s gyrations in the past few weeks, the S&P 500 is roughly flat this year. If we stay on script, we should expect the market to surge in November after the uncertainty of the elections is behind us.

Stephen McBride is the editor of RiskHedge Report, a free weekly newsletter that shows how to profit from disruptive trends like self-driving cars, artificial intelligence, cloud computing, and others.

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