It's mid-term season, and that means we need to think about how the political climate might impact investments. After all, there's no denying that politics and the stock market are closely intertwined. So, are mid-term years good for the stock market? Let's take a look at the data to find out.
The Effect of Mid-terms on the Stock Market
Historically, stocks tend to do better after midterm elections. In 17 of the 19 midterm elections held since 1946, stocks performed better in the six months after the election than they did in the six months prior.
However, when investors feel confident about the direction of the country, they're more likely to invest in stocks. And, despite all the partisan bickering we see on TV, both Republicans and Democrats tend to work together more in mid-term years than they do in presidential election years. That cooperation often leads to pro-business policies that boost corporate profits and spur economic growth—both of which are good for the stock market.
It's important to remember that past performance is no guarantee of future results. So, even though mid-term years have been good for stocks historically, there's no guarantee that will continue to be the case in the future. This year is shaping up to be a particularly volatile one, thanks to trade tensions with China, the issues with Russia, concerns about rising interest rates, and fears of a potential recession on the horizon. As a result, some experts are predicting that we could see a correction in the stock market this year. Either way, it's important to be prepared for anything—especially if you're investing for retirement.
Mid-Term Elections and Your Investments: The Bottom Line
As an investor, it's important to keep an eye on politics—especially during mid-term election years. This year looks like it could be a particularly volatile one, so it's important to be prepared for anything. But as long as you stay diversified and don't put all your eggs in one basket, and get the right help and advice from a certified professional, you should be able to weather any storms that come your way—mid-term election year or not.
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