As we approach the midterm congressional elections, some have questioned whether the recent surge in volatility is a precursor of what is to come.
Since 1966, increased volatility and muted returns have characterized the months leading up to the election. However, the S&P 500 actually tends to see above-average performance in midterm years starting in mid-October and continuing into the following year. As illustrated in the chart above, returns in the months following the election have typically exceeded non-midterm years by a wide margin. This suggests that the specific outcome is less critical than the clarity that the end of the election cycle can provide.
While the recent volatility can seem quite impactful on a portfolio, this is not unusual at this point in the election cycle. Of course every year is different, but history suggests that pre-election volatility is typically followed by better results and the potential for stronger returns may lie ahead. Staying invested and sticking to a long-term investment strategy is the best way to navigate through these periods of short-term volatility.
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Plante Moran Financial Advisors (PMFA) publishes this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult a representative from PMFA for investment advice regarding your own situation.