Midterm seasonality: Is there a 100% chance of a higher S&P 500 in 3 months' time?

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According to Bloomberg, there is a possibility for S&P500 to rise over 0.5% if the Republicans hold onto Congress but to fall by 3.3% if the Democrats hold Congress. However, the medium-term picture for the midterm elections looks fairly strong.

Midterm seasonality from Nov 20 – Dec 30.

Seasonax shows that since 1950 the S&P500 has only lost value three times. That was in 1974, 2002, and 2018. The rest of the years saw an average profit of 3.55%. See below for the info on the S&P500 from 1950.

In fact, according to All Star Charts, the S&P500 was up 7.5% on average 3 months after the midterms. Furthermore, the S&P500 was up 100% of the time over the last 6 months. So, according to recent history, there is a 100% chance of the US S&P500 being positive 6 months from now.

The main risks to this view

The obvious risk to this view is that the Federal Reserve is maintaining its very hawkish stance. In last week’s Fed meeting, Jerome Powell pushed back against the idea of a lower terminal rate and kept the pressure on stocks. However, the idea of a Fed pause is not out of the realm of possibility, so these strong seasonals are certainly worth keeping in mind.


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