Market History and Midterm Elections: A Guide for Investors
Experienced investors know that politics and Wall Street often intersect, particularly during a midterm election year. While no specific candidates or parties will be endorsed, it’s crucial for all investors to be aware of market history. Both novice and seasoned investors may find stability in exchange-traded funds (ETFs) like the Invesco QQQ ETF (QQQ) and the Vanguard S&P 500 ETF (VOO).
The Intersection of History and Investing
The adage “History doesn’t always repeat, but it often rhymes” rings true in investing. Since 1957, the S&P 500 has seen average annual returns of 10%, advocating for the benefits of long-term investing. However, historical data shows that midterm election years tend to be the worst for stocks, averaging a mere 4.9% gain—less than half of the overall average. Despite this trend, ETFs like QQQ and VOO have shown significant returns this year, up 19.5% and 14.7%, respectively.
Importance of Historical Context
This midterm-year lethargy isn’t a new concept—it’s been noted since 1950 as the time when stocks generally perform poorly. Yet, the recent performance of QQQ and VOO demonstrates resilience against these historical trends.
Key Data for VOO ETF
- Today’s Change: -0.19% ($-1.34)
- Current Price: $713.61
- AUM: $1.7T
- Dividend Yield: 1.03%
- Expense Ratio: 0.03%
- Top Holdings: NVDA (7.55%), AAPL (7.05%), MSFT (5.36%)
Future Projections: The Year Following Midterms
Investors should also take note of what the following year typically holds. After a midterm election year, the third year of the presidential cycle often witnesses the best performance for stocks, with the S&P 500 delivering an average 14.5% gain. This uptick can be attributed to a variety of factors, including presidential initiatives to boost the economy, benefiting sectors like growth and consumer stocks.
Conclusion
For long-term investors, now may be a strategic time to consider buying stocks through ETFs like QQQ and VOO. Not only can these funds help navigate the current market, but they also position investors for potential growth in 2027, should historical trends persist.
