Post-election popWhat does this mean for investors? Let's cut to the chase: It doesn't really matter if Harry Reid or Mitch McConnell runs the Senate. While making investing decisions based on past market behavior is always risky, history shows that stocks usually head up in the 12 months following a mid-term election regardless of which political party prevails. Sam Stovall, equity strategist at S&P Capital IQ, has crunched the numbers, going back to 1946 and the results are illuminating. According his research, the S&P 500 Index has gained 15.3% on average the first six months after a midterm election. And that has happened 94% of the time, according to Stovall's research.
History repeatsWait, it gets better. In the 12 months after a midterm election, the S&P has averaged 17.5% average growth and has never declined going back to 1946. Never! Bonds often enjoy a pop as well, according to S&P Capital IQ, averaging a six-month total return of 6.5% in eight of the nine midterm cycles since 1978. Even if you don't buy the S&P analysis, others remain bullish on stocks regardless. In a recent note to clients, Nuveen equity strategist Bob Doll sees stock market climbs ahead thanks to a U.S. economy that remains surprisingly robust.
"Although there are concerns to the contrary, the U.S. economy remains in acceleration mode, and we think there is little chance that we'll see either a recession or a deflation scare in the United States. Investors are coping with new issues that are prompting higher levels of volatility (such as Ebola and heightened geopolitical risks) but the state of the U.S. economy remains solid."