Midterm Election to Effect Stock Market in 2023

By Indu Tyagi Ketan , 28 February, 2023

The stock market has underperformed throughout the years leading to midterm elections while performing significantly better after the ballots have been cast, as per the reports.

According to the survey, the average annual return of the S&P 500 in 12 months before the midterm election has been -0.7 percent for all the years from 1962 to 2022. But after a midterm election, the index has outperformed historically in its long-term average of 12 months along with an average return of 16.3 percent.

The high degree of uncertainty, one theory of investor’s kryptonite, that the runup of election is negatively influencing market performance, due to the lack of fuelling stock market rallies. According to an analysis from U.S. bank, it has found that the outcome of the midterms has no significant impact on post-election performances of stock market, even if the election environment says that the Republican win would favour businesses and also the stock market.

And not so surprisingly, the biggest influencer of market in midterm election years was found to be the health of the overall economy. Thus, the investors should not expect an enormous post-election bump in the coming months. With high inflation rate, global crises abound and rising interest rates, the risk of a recession in 2023 is real and will likely damp any post-election bump in the stock prices.

Markets Tend to Rise After the Midterm Elections