U.S. stocks may find relief after November’s midterm elections, with historical market patterns pointing to potential gains regardless of which party wins, say analysts.
The S&P 500 has gained an average of 15.5% from Election Day through June 30 of the following year since 1950, reported MarketWatch on Sunday, citing an analysis conducted by Matt Cerminaro, founder of financial-adviser platform Exhibit A.
“The best midterm strategy is to turn off the TV and set a buy order for Election Day,” he told the publication.
Election Cycle Could Lift Stocks Higher
Sam Stovall, chief investment strategist at CFRA Research, told the publication that corporate earnings have helped counter concerns involving high oil prices, elevated interest rates and other market pressures.
The period ahead includes the third year of the four-year presidential cycle, historically the market’s strongest year, highlighted Stovall. The fourth quarter of a midterm year ranks second among the cycle’s 16 quarters.
The strategist said the governing party could pursue stimulative policies before the next presidential election, potentially producing economic benefits by re-election season. According to his analysis, the fourth quarter historically delivers the S&P 500’s strongest average returns, even in non-election years. However, a market rebound may depend on technology stocks, which account for nearly 40% of the index, recovering from recent losses.
Midterms Could Trigger AI Bubble Burst
The historical outlook comes as investors confront warnings about inflation, economic weakness and stretched artificial intelligence valuations as the midterm elections approach.
Last week, veteran investor Peter Schiff warned that a market crash could occur before the midterms. “Remember, this is October,” Schiff said, citing rising Treasury yields, accelerating inflation, a softer labor market and a weak economy. He also argued that AI capital expenditures are currently keeping U.S. GDP growth positive and that an impending recession would be bullish for gold and mining stocks.
In September, Bull Theory said a Republican loss in November could become the “trigger” for an AI bubble to burst. The research firm, citing JPMorgan, said that AI spending by hyperscalers, including Amazon.com Inc. (NASDAQ:AMZN) and Alphabet Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG), is projected to consume 93% of their cash flow in 2026, up from 33% in 2023. Their bond issuance is also expected to rise to $250 billion from $121 billion in 2025, increasing reliance on debt and external financing.
Price Action: Year-to-date, the State Street SPDR S&P 500 ETF Trust (NYSE: SPY) climbed 11.45%, while the Invesco QQQ Trust (NASDAQ: QQQ) rose14.67%, as per Benzinga Pro.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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