Midterm Madness

September 22, 2022 | Thomas Neuhardt, Research Associate

If inflation, rising rates, and a war in Europe were not enough to keep markets interesting this year, 2022 is also a midterm election year. Based on data over the last nine decades, midterm election years — while only marginally more volatile than non-election years overall — tend to exhibit a distinct performance pattern throughout the year. On average, returns during midterm years tend to be flat to slightly negative through the first three quarters as investor confidence is dampened by uncertainty around the outcome of the election. Historically, returns start to pick up as November draws near and tend to finish strongly, with fourth quarter returns in midterm years significantly stronger than non-midterm years. This holds true regardless of which party wins the House and Senate and whether or not there is a change of control, suggesting investors value predictability more so than a specific party controlling Congress. While each year is unique, and this analysis does not consider the deluge of other macroeconomics issues plaguing 2022, it is interesting historical context. Come November 6, there may be one less source of uncertainty in markets.

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The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Thomas Neuhardt
Research Associate

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