This Market Signal Has Been 95% Accurate for Nearly 90 Years. What Investors Need to Do Now to be Ready
The S&P 500 has seen positive returns in the 12 months after midterm elections 95% of the time since 1938.
Overview
One of the best predictors of stock market performance over the past nearly 90 years isn't some fancy valuation metric, like the Shiller cyclically adjusted price-to-earnings (CAPE) ratio or Buffett indicator. Nor is it some complex macroeconomic forecast or interest rate model. It's actually the midterm elections.
According to research by Fidelity, the S&P 500 (SNPINDEX: ^GSPC) has had a positive performance one year after the midterm elections 95% of the time since 1938. The best thing is that it hasn't mattered which party wins, or whether the incumbents or challengers take more seats. The reason for this appears to be that the political uncertainty heading into the election fades after the votes are tallied.
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Originally published at www.fool.com.