Why the Stock Market May Break the Mid-Term Election Year Curse

Seldom are the 2nd and 3rd quarters good for stocks. But their performance thus far is OK.

To the extent politics affects the stock market, mid-term elections are not historically a friend. . But maybe this one will be different, if early indications prove out.

To Sam Stovall, the chief investment strategist for CFRA, “the two quarters leading up to the mid-term elections have been the most challenging of the entire 16-quarter presidential cycle.” The second and third periods have recorded the only two successive quarterly declines since World War II, he wrote in a research note, down 2.5% and 0.9%, respectively.

Stovall wrote this before the second quarter was over. Well, the S&P 500 climbed 5.7% in the April-June period, fueled by boffo earnings. And as we begin the third quarter, the broad market is up 3.85%. Investors are apparently shrugging off negative news, such as a gathering trade war.

As Stovall explained it, “During mid-term election years, one word tends to describe investors’ mindset and the driving force behind share-price performances: uncertainty.” That translates to fear of a partisan gridlock as the party out of power gains seats in Congress, and political messes don’t inspire stock traders.

But at the moment, investor qualms seem to be overwhelmed by the good news.

Tags: , ,