Many investors are concerned with the effect of election results. Do past results suggest a useful strategy to deal with election-year uncertainty?
The answer is yes.
For the 96-year period ending in 2021, the S&P 500 Index (with dividends reinvested) posted an average return of 12.33% for all calendar years and results were negative in roughly one out of four. During that time there were 24 midterm congressional elections. The average return for the 12-month period following the election was significantly higher at 19.58%, with only one negative result.
These results should come as no surprise. Voters express their opinion at the midterm ballot box once every four years. Consumers express their opinion at the cash register every day by deciding which products and services to buy.
We invest in companies located in Moline, Illinois (Deere & Co.), Los Gatos, California (Netflix), and Bentonville, Arkansas (Walmart) to name a few. Government policies may have an effect—either positive or negative—on some firms, but the men and women running these firms face challenges and opportunities from dozens of factors.