Chart Of The Day: Midterms And Markets

A MoneyShow chart reports that the S&P 500 has tended to rally after Election Day, based on average performance following midterm and presidential elections from 1980 through 2024. The article says this pattern held regardless of which party controlled Congress or the White House; it provides no return magnitude.

Analysis

The post-election pattern is better treated as a possible uncertainty-premium unwind than as a durable earnings signal. Any near-term relief rally can be crowded or short-lived if the result leaves policy, fiscal negotiations, or control of Congress unresolved. The cited average is not enough to establish a tradable edge: without the event count, median return, dispersion, and comparison with ordinary seasonal returns, a few strong episodes could dominate it.

Over days, watch positioning and implied volatility: a sharp volatility decline may capture most of the event premium before cash equities extend higher. Over 1–3 months, the market’s response should hinge more on rates, earnings revisions, and fiscal-policy specifics than on party labels. Over 6–18 months, sector effects depend on enacted policy and implementation, not election outcomes alone; avoid broad sector bets until that path is clearer.

Contrarian risk: investors may overread a favorable historical average and buy the calendar while ignoring valuation, macro deterioration, or a contested outcome. The thesis weakens if post-event volatility remains elevated, earnings expectations fall, or rates rise enough to pressure equity multiples. No standalone directional edge is established by the information provided.

Key Decisions for Investors

• Do not add broad equity exposure solely on the historical post-election average. Keep core positioning tied to earnings, rates, and portfolio risk limits.
• For the next several sessions, monitor broad-index implied volatility and market breadth; a volatility drop without improving breadth would argue against chasing a relief rally.
• Treat any election-related exposure as tactical over the next 1–3 months. Reassess after fiscal and policy details emerge, rather than extrapolating party control into sector earnings.
• A bullish calendar thesis is falsified by persistently elevated volatility, broad negative earnings revisions, or a material rise in rates that pressures equity valuations; absent those checks, there is no high-conviction trade.