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Market Update: 09-18-18


John Lynch Chief Investment Strategist, LPL Financial | Jeffrey Buchbinder, CFA Equity Strategist, LPL Financial

Will midterm elections drive mayhem in the markets? The upcoming midterm elections promise to be among the more interesting in recent decades. The Republicans can take comfort in elections generally being about “…the economy, stupid!” Unemployment is at multidecade lows and wages are trending higher. On the other side, Democrats can point to the administration’s lack of progress on trade, President Trump’s below-average approval ratings, and the number of House of Representatives seats historically lost in a president’s first midterm election (~29 based on the past 13 such elections over 100-plus years, according to Strategas Research Partners). While historical patterns, recent polling data, and betting sites suggest odds slightly favor that the House flips, what does that potentially mean for policy, and how might markets react? We take a look here..


As stock investors, we have mixed emotions about the upcoming midterm elections. On the one hand, historically, stock market volatility increased ahead of the elections due to policy uncertainty. However, stocks also tended to rebound strongly coming out of midterm election-year lows, as we wrote about here. The S&P 500 has been higher one year after the midterm election than it was on midterm election day every time since 1946. We are now entering the most favorable part of the four-year presidential cycle...

Download the complete PDF with graphs here.

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