Since 1925 the S&P 500 has risen in 19 of 22 midterm-election-year fourth quarters. That’s a whopping 86.4%.
Camas, WA (PRWEB) June 24, 2014
Fisher Investments CEO and Forbes columnist Ken Fisher discusses what 2014’s midterm elections may mean for stocks in his latest column, “Investors: Expect a Great Fourth Quarter.” As the Forbes title suggests, Fisher believes the election is bullish. Why? The Midterm Election Year Fourth-Quarter Effect.
Fisher, a long-time student of the relationship between politics and stocks, explains that while returns are varied, fourth quarters of midterm-election years are overwhelmingly positive. “Since 1925 the S&P 500 has risen in 19 of 22 midterm-election-year fourth quarters. That’s a whopping 86.4%. One of the other three wasn’t negative—but 0.0%. Hence it’s been negative only 9.1% of fourth quarters. One was merely -5%. Only once was it down much, -16.4% way back in 1930—during the crash.”
In his Forbes investment column, Fisher explains why this happens—because midterms usually result in gridlock, and investors are slow to realize. Since 1932, only FDR and George W. Bush have picked up seats in both the House and Senate in a midterm contest—both in their first terms. Otherwise, Presidents have lost relative power, which reduces the likelihood Congress can pass radical legislation interfering with property rights—a big positive for markets. But investors typically don’t realize until late in the year that candidates have little chance of keeping their loud campaign promises.
This effect stretches beyond the fourth quarter. According to Fisher’s Forbes investment column, “both of the next two quarters—the first and second of a President’s third year (or seventh)—have been positive 86.4% of the time, although with slightly lower average positive returns: 9.1% (first quarter) and 7.2% (second).”
Fisher's Forbes investment column will be printed in the June 30, 2014 issue of Forbes, but the online version is currently available: http://www.forbes.com/sites/kenfisher/2014/06/18/investors-expect-a-great-fourth-quarter/
Fisher, CEO and Co-Chief Investment Officer at Fisher Investments, has written his monthly Forbes Portfolio Strategy column since 1984 and is the third-longest running columnist in the magazine’s over 90-year history. Ken Fisher’s Forbes investment columns can be accessed at http://www.forbes.com/sites/kenfisher/
About Fisher Investments
Founded in 1979, Fisher Investments is an independent, privately owned money management firm with tens of billions under management. Fisher Investments maintains two principal business units, Fisher Investments Institutional Group and Fisher Investments Private Client Group, which serve a global client base of diverse investors. Fisher Investments’ clients include over 100 large institutions and over 25,000 high net worth individuals. Founder and CEO Ken Fisher has written the Forbes “Portfolio Strategy” column for over 29 years, has written ten books on investing and personal finance (four of which are best sellers), and was recently named by Investment Advisor magazine as one of the 30 most influential industry individuals in the last 30 years (Thirty for Thirty, May 2010).