Past election cycles have rewarded stock market buyers

Historical patterns suggest the election's ultimate victors will be the stock market bulls, not the political parties.

The weakest six-month post-election stretch still produced a gain of 3.3%, which is about 7% on an annualized basis. That's an impressive track record, especially when compared with the substantial gains achieved in other cycles.

The pullback in equities has brought valuations to a more advantageous starting point. Meanwhile, the fear and greed index sits at a level that strongly favors bullish investors.

In the same vein, the AAII sentiment survey reports bearishness at 41.4%, compared with its historical average of 31.5%.

The author worries that the post-midterm data are already fully priced in by the market. Looking ahead, the focus should be on artificial intelligence and the evolution of related expenditure. Responses to recent earnings reports have been concerning, and large-cap companies are turning to equity issuance as debt markets tighten.

It is tough to see how firms can swiftly justify data center investments in a market demanding proof. The bearish reversal seen yesterday was severe, leaving Google 31% below its yearly peak amid disruption to search.

The event to watch is not the midterm elections but developments in Iran. If oil prices decline, inflation would drop, enabling interest-rate cuts. Such a scenario would be especially beneficial if tariffs are also reduced.

For the moment, the author plans to observe the election returns, believing a solid Democratic performance could restore a degree of normalcy in Washington and solidify anti-war sentiment as a key electoral priority. The next 24 hours will be hectic, but America will continue to offer many excellent investment opportunities. While this pattern holds true in most elections, Brazil stands as a notable exception.