US stocks have proved for seven decades that death and taxes are not the only certainties in life

  • After every US midterm election since 1946, the S&P 500 has finished higher over the next year.
  • The S&P 500 surged 2.12% on Wednesday, the largest daily gain immediately following a midterm election in 36 years.

The only certainties in life are death and taxes, as the saying goes.

However, if you’re talking since 1946, perhaps there’s a third certainty that you can bank on in life: that US stocks will rally after midterm elections.

Just look at the chart below as evidence. It comes courtesy of AMP Capital.


Mind-blowing, right?

Every single time since 1946, the US S&P 500 has ended higher 12 months after the midterms were held.

“[This is] probably because the president starts to focus on re-election and so tries to boost the economy,” says Shane Oliver, Head of Investment Strategy and Chief Economist at AMP Capital.

Whether due to that hypothesis or other factors, it’s impossible to argue that this is traditionally a good period for US stocks: it is, clearly.

In 2018 things are already looking good for this well-ingrained trend with the S&P 500 surging 2.12% on Wednesday, the largest gain in the day following the midterms in 36 years.

If you don’t mind exchange-traded funds (ETFs), and think history repeats, going long US stocks over the next 12 months may be a trade worthwhile considering.

As ever, a gentle reminder that past performance is not indicative of future returns. After the run US stocks have seen over the past decade, some might even add in the additional disclaimer that if it looks to good to be true it often is.

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