Be the first to like this
Could the Mid-Term Elections Cause You to Lose Money?
In just a couple of months the country will vote in the mid-term elections. This is the election that falls between presidential elections. On the Federal level, all seats in the US House of Representatives are up for election every two years and a third of US senate seats as well. There is a tendency for the party that did well in the presidential election to lose seats in this “off year” election. Because of the potential for a significant shift in political power on the Federal level, investors are wise to pay attention. Could the mid-term elections cause you to lose money? Here are some thoughts on the subject.
The Effect of Mid-Term Elections on Stocks
Zacks Investment Management has some useful things to say about how mid-term elections affect stocks.
Because midterm election years can mean a shift in the balance of power in Congress, it also means that there is an increased risk of one party enacting new laws and/or policies in the lead-up or once the power dynamic is set. Markets, in our view, do not like policy uncertainty.
This thought is supported by the figures they quote.
Going back to 1962, the average correction during a midterm election year was an eyebrow raising -19%.
Since 1962, the average bounce for stocks following the midterm correction was a sturdy +31%.
Their approach to politics is that they are only interested to the extent that what the government does has an effect on investing by way of “property rights, corporate profits, and economic growth.”
If you believe these folks, you could lose money going into the mid-term election and win even more back afterwards.