From the desk of Willie Delwiche.
This is a good time to think about what could happen after the midterms because the run-up to this fall’s elections could be almost unbearable. The Fed, the Supreme Court and lingering fights over the 2020 election will provide candidates of all stripes with plenty of political fodder. The public mood is already dour and an onslaught of negative ads is not likely to help. History and conventional wisdom suggest stocks could struggle for traction over the summer, find a low prior to the election and then rally as the outcome becomes evident. The S&P 500 has been higher 12 months after every single mid-term election since at least 1950. The problem with that information is that it is being widely discussed. The data is what it is and the past is all we have to go on. Nonetheless, the words of Bernard Baruch seem relevant right now: “Something that everyone knows isn’t worth anything.”
An alternative view is that the pattern of the S&P 500 since its early year peak is not dissimilar to what was seen after its October 2007. If that period is a roadmap for now (and there are enough similarities for me to not immediately discount the possibility) the S&P 500 could rally off and on into mid August before resuming its downtrend as we move to and through the midterm elections. That pattern would catch many off guard. It’s up to the bulls to prove that it is not a likely path.