S&P 500 Shows Strong Performance Post-Midterms, Preference for Divided Government Confirmed

The S&P 500 typically enjoys robust performance following midterm and presidential elections, with an average increase of 13.7% within one year after midterms, reported several outlets ¹. This trend suggests that the market may be poised for growth in the coming months, despite the current economic uncertainties.

Markets tend to favor a divided government, where one party controls the White House and another holds at least one house of Congress. This setup often leads to an average S&P 500 increase of 15% within one year, according to reports ¹. However, even in scenarios where one party retains control of both houses and the presidency, the S&P 500 still sees notable gains, averaging a 10.9% increase after one year ¹.

While election outcomes can influence market sentiment, experts note that factors such as Federal Reserve policy and corporate earnings cycles play a more significant role in determining overall market performance ¹. Despite this, the historical data indicates that the S&P 500 has shown resilience and growth following electoral changes.

In recent years, the S&P 500 has experienced both peaks and troughs post-election. For instance, the market saw its worst performance in 2000, with a 22.1% drop attributed to the dotcom bust ¹. Conversely, the S&P 500 achieved its best post-election performance in 2020, with a 38.3% gain following the recovery from the COVID-induced market downturn ¹.

Voters' concerns extend beyond just market performance, with political corruption ranking as the top issue facing the nation, according to a CNBC poll ². In this poll, 36% of voters identified corruption as the most pressing concern, highlighting the public's desire for transparency and accountability in governance ².

Democrats hold a slight edge over Republicans when it comes to handling political corruption, with 93% of those surveyed supporting measures to prevent members of Congress and the president from owning or trading stock in companies with federal contracts ². Additionally, 89% of respondents agreed that companies owned by a sitting president’s immediate family should not receive federal contracts ².

However, efforts to enact these measures faced obstacles. On September 30, Senate Democrats rejected the Stop Insider Trading Act, which would have prohibited members of Congress, their spouses, and dependent children from buying new stock in public companies while in office ². The act also required public notice before lawmakers could sell stocks they already held ².

Notable examples of potential conflicts of interest include Nancy Pelosi’s household selling 2,000 shares of Visa worth between $500,000 and $1 million on July 1, 2024, and Paul Pelosi purchasing over $1 million in Nvidia call options weeks before Congress voted on major subsidies for the chip industry in 2022 ². These instances underscore the ongoing debate around insider trading and the need for stricter regulations.

What we know

• - The S&P 500 typically performs well after midterm and presidential elections ¹
• - The S&P 500 increased by an average of 13.7% within one year after midterm elections ¹
• - Markets generally prefer divided government ¹
• - The S&P 500 tends to rise by an average of 15% within one year when there is no single party in control after elections ¹
• - The S&P 500 saw an average increase of 10.9% after one year when Democrats control both houses of Congress and a Republican holds the presidency ¹
• - Political corruption is the top issue facing the nation, according to a CNBC poll ²
• - Democrats have a four-point edge over Republicans regarding handling political corruption ²
• - 93% of those surveyed support measures to prevent members of Congress and the president from owning or trading stock in companies with federal contracts ²
• - 89% of those surveyed think companies owned by a sitting president’s immediate family should not receive federal contracts ²
• - Nancy Pelosi’s household sold 2,000 shares of Visa worth between $500,000 and $1 million on July 1, 2024 ²
• - Paul Pelosi bought over $1 million in Nvidia call options weeks before Congress voted on major subsidies for the chip industry in 2022 ²