Do Mid-Terms Matter?
by Mary Suplee on Nov 6, 2018
Every two years, the full US House of Representatives, one third of US Senators, and countless Governors, Mayors and Legislators come up for election. The outcomes of these elections are usually uncertain but we can be sure that some prognosticator will issue dire warnings about what will happen if the other side wins. That's what sells advertising.
Long-term investors should focus on the long-term. They should not give weight to midterm elections. Remember, common knowledge is often vastly incorrect. Almost universally, pundits warned that if Donald Trump won the presidency it would be bad for the markets. That was not a good call.
What about congressional elections? Many a market strategist has been offering their opinion for the last three weeks about what will occur. I don't give a lot of credence to these either. The data for the stock market going back to 1926 shows that returns in the months that midterm elections took place were not significantly different than the returns in any other month.
While it's easy to get distracted by all the noise, what matters for the long-term investor is being invested over the long-term. Look at the chart below. It shows how markets have performed over time under Democrat, Republican and mixed congresses. Does anything stand out? What I mostly see is a steady progression upward. Patience, tax minimization, rebalancing, portfolio structure, and managing your emotions all are part of a good investment strategy. Trying to outguess the market is not.