Polymarket odds show >50% chance of a Democratic sweep in Congress in the midterms. Will it matter for markets?
History says stocks love the third year of the Presidential cycle, and a divided government doesn't change that. Since 1940, the average market return in the third year of the election cycle has been 16.5%. Under Republican Presidents, the average is 18.2%. Republican Presidents with a Mixed Congress (2 instances) presided over an average 23.1% return in the year after midterms, while Republican Presidents with a Democratic Congress (7 instances) saw a 15.6% market return.
The election is only likely to pressure stocks if it also results in or coincides with a material change to the outlook for the foundation of stock prices’ gains - earnings and economic conditions.
History says stocks love the third year of the Presidential cycle, and a divided government doesn't change that. Since 1940, the average market return in the third year of the election cycle has been 16.5%. Under Republican Presidents, the average is 18.2%. Republican Presidents with a Mixed Congress (2 instances) presided over an average 23.1% return in the year after midterms, while Republican Presidents with a Democratic Congress (7 instances) saw a 15.6% market return.
The election is only likely to pressure stocks if it also results in or coincides with a material change to the outlook for the foundation of stock prices’ gains - earnings and economic conditions.
