Brian Rehling, CFA ®
by
Co-Head of Global Fixed Income Strategy

S&P 500 Index average performance during midterm election years (data since 1950)


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Sources: Wells Fargo Investment Institute, Bloomberg, Data as of June 30, 2018. Chart is for illustrative purposes only. There is no certainty the S&P 500 Index will perform similarly in the 2018 midterm election year as it has in past midterm election cycles or in future midterm elections or produce similar returns as shown above. An index is unmanaged and not available for direct investment. Past performance is no guarantee of future results

This chart displays effects on the S&P 500 Index prior to, and immediately following, U.S. midterm elections, dating back to 1950. Historically, it has been common for investors to experience equity market corrections in the run-up to midterm elections, and 2018 has followed that pattern. In early September, we warned that “market volatility may increase as we approach new national elections,”  and that’s what we saw in October.

Once the uncertainty has been removed following midterm elections, the S&P 500 Index historically has performed well. It has not mattered which party was in charge before or after the midterm elections. The removal of uncertainty and of constant media attention allows markets to resume focusing on fundamentals.

What it may mean for investors

In our view, investors should avoid making investment changes based purely on fears or speculation following election outcomes. As policies change, potential investment opportunities may arise, but investors would be wise to await signs of action in Congress. Moving forward, we believe that investors should continue to focus on the solid economic outlook.

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