Written by: Angelica Roxas
Lately, we have seen a lot of volatility in the markets, and I have some (good) news for you; we will see some more. We are ensured to have continued volatility with the covid variants, the Ukrainian war, and being a mid-term election year. This knowledge is good because we know to expect it, and if we know what to expect, we can prepare or use it.
A recent Forbes article goes through data from CFRA that looked at volatility and market returns throughout a president’s term in office. It did not matter who (which party) was in control of the Whitehouse or congress nor which term if a two-term president. Here are the key points they found:
- Stocks usually sell-off before a midterm election.
- There is significant market volatility right before and after midterm elections in Q3&4.
- Stocks will usually move higher in the two quarters following the midterm election (Year 3 Q1 has the best returns of an entire presidential term).
Graphs Courtesy of CFRA and S&P Global
If these trends hold, we are just about to enter Q2 of year two, and even if you think we have had recent volatility (due to Covid, Inflation, and Ukrainian war), we are probably looking at even more (and losses for Q2 and Q3) until just after the election. However, it may be wise if you are trying to time the market, which I usually would not suggest, to get in just slightly after the election concludes.
Having this kind of knowledge is power, and it can help us weather the ongoing storm likely to continue through the summer. Stocks will likely go both up but more so down. You should neither panic nor fall for fear of missing out (FOMO). Just ride it out and know that you are waiting for the smooth seas and upturn that will end the year and lead into the next.
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