Historically, mid-term elections have served as reflection points for stocks. Regardless of the outcome, stocks have rallied before the election in the second half of October, and the rally has continued through the following year. The S&P has not declined after a mid-term election since 1946, and the average 12-month increase has been about 16%.
Even more interesting is that there have been rather significant market corrections in mid-term election years. Since 1962, the average market correction during mid-term election years has been a loss of 19%. Perhaps more important, one year after these corrections, the market was up an average of 32%.
Our crystal ball has been in the shop for repairs for a long time, so we have no way of knowing what will occur in 2014-2015. But the history is pretty compelling. Both the S&P 500 and the Dow Jones Industrial Average have exhibited similar patterns in the last 17 mid-term election years.
So will 2014 make it 17 in a row for the markets’ numbers in mid-term election years? Or will it be the first time in more than 50 years to buck the trend? It is a complex question with an answer that is guesswork at best.
At PDS Planning, we prefer a simpler method to portfolio management. We encourage our clients to discount the short-term, event-driven headlines and instead maintain a portfolio that is consistent with the goals we have set with them in their financial plan.
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment, strategy, or product or any non-investment related content, made reference to directly or indirectly in this newsletter, will be suitable for your individual situation, or prove successful. This material is distributed by PDS Planning, Inc. and is for information purposes only. Although information has been obtained from and is based upon sources PDS Planning believes to be reliable, we do not guarantee its accuracy. It is provided with the understanding that no fiduciary relationship exists because of this report. Opinions expressed in this report are not necessarily the opinions of PDS Planning and are subject to change without notice. PDS Planning assumes no liability for the interpretation or use of this report. Consultation with a qualified investment advisor is recommended prior to executing any investment strategy. No portion of this publication should be construed as legal or accounting advice. If you are a client of PDS Planning, please remember to contact PDS Planning, Inc., in writing, if there are any changes in your personal/financial situation or investment objectives. All rights reserved.