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What if I told you that one of the most reliable bullish signals in stock market history is about to flash?
And it has nothing to do with the Federal Reserve, corporate earnings, or the latest artificial intelligence breakthrough.
It’s something that happens every four years.
The midterm elections.
With Americans heading to the polls on November 3, the headlines are filled with political predictions, uncertainty, and plenty of reasons to worry about what happens next.
But while everyone else is focused on who will control Washington, I’m focused on something much more important for investors.
What happens to the stock market after the votes are counted.
And the historical numbers are nothing short of extraordinary.
According to research from Capital Group, the S&P 500 has finished higher in the 12 months following every midterm election since 1950.
Think about that.
We’re talking about nearly eight decades of elections, recessions, wars, inflation scares, and political uncertainty. Through all of it, the stock market has delivered a positive return in the year following every midterm election in that historical sample.
The average gain? An impressive 15.4%.
That’s not a prediction that stocks will rise 15.4% over the next year. It’s an historical average. But when a pattern has persisted through so many different economic and political environments, it’s worth paying attention to.
And there’s another statistic that makes me even more excited about what could be ahead.
The third year of a presidential term has historically been the strongest year of the four-year cycle.
According to LPL Financial, the S&P 500 has averaged an approximately 18% gain during the third year since 1950.
Guess what year comes next?
2027.
I don’t believe elections magically make stocks go higher. But I do believe uncertainty plays an enormous role in how investors behave.
In the months leading up to an election, investors worry about taxes, regulation, government spending, and which party will control Congress. That uncertainty can cause businesses to delay decisions and investors to become overly cautious.
Once the election is over, some of that uncertainty disappears.
Investors can begin looking beyond Washington and focusing on what really drives stock prices over time: corporate profits, economic growth, and innovation. And right now, all three are creating a powerful foundation for the next leg of this bull market.
And here’s something else worth remembering.
The market doesn’t care whether Republicans or Democrats win nearly as much as the political commentators would have you believe.
Historically, stocks have delivered strong returns under a variety of political configurations. The important lesson is that investors who allow political opinions to dictate their portfolios can miss tremendous opportunities.
Now let’s talk about why the next 12 months could be particularly juicy.
I’ve been pounding the table about something that most investors are overlooking.
Underneath the major stock market indexes, we’ve already experienced a significant correction.
Many individual technology and innovation stocks have suffered painful declines. Some are down 20%, 30%, or more from their highs, even as the headline indexes have held up relatively well.
That’s created a strange situation.
Investors are worried about a market that’s already punished many of the companies positioned to benefit from the next wave of technological innovation.
And now we’re approaching a period that’s historically produced some of the strongest returns of the presidential cycle.
I love that combination.
Not because every beaten-down stock is suddenly a bargain. Some deserve to be trading lower.
But because the market is offering investors another opportunity to buy into long-term trends at prices that were unavailable just a few months ago.
My investment outlook hasn’t changed.
I believe we’re still in the early stages of an innovation-driven bull market that could last several more years.
AI is transforming entire industries. Robotics is moving from factories into everyday life. Quantum computing is advancing. And breakthroughs in genomics and AI medicine are creating possibilities that would’ve seemed unimaginable a decade ago.
These revolutions aren’t going to stop because of an election.
In fact, I believe the convergence of these technologies could drive one of the greatest periods of wealth creation we’ve ever witnessed.
And if history is any guide, the next 12 months could provide a powerful tailwind.
The midterm elections are just eight days away.
While everyone else is counting votes, I’ll be looking for the next generation of stock market winners.
Because I believe the biggest mistake investors can make right now isn’t taking too much risk.
It’s sitting on the sidelines while the next great bull market unfolds.
P.S. Like I said, Wall Street’s favorite election is eight days away. My colleague Nate Bear has his eye on the day after it. He’s tracked a pattern that kicks in as soon as the votes are counted, and this Wednesday, October 28 at 2 p.m. ET, he’s going live to reveal the trade he’s targeting for November 4. Click here for the details.
