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Editor’s Note: Today’s piece is all about what history says happens after the midterms… but history only gets you so far. When the results hit, you need a trade. That’s why I want you at Nate Bear’s Midterm Money Shock Summit today at 2 p.m. ET, the same hour the Fed drops its decision. Nate is revealing the exact trade he plans to send out at noon on November 4, the day after the vote… and the clock is ticking.
Click here to save your free seat before it starts.
Early voting has started for next Tuesday’s midterms… and the market implications could be tremendous.
Crypto, data centers, housing costs, trade wars, and oil prices all hang on what happens in Washington next.
On top of that, you’ve got the Fed, inflation, AI valuations, and Q4 earnings… plus about $572 billion in U.S. non-financial corporate bonds coming due in 2027, according to Reuters.
A lot of that debt was borrowed at rock-bottom rates during the pandemic. Now companies have to refinance it at today’s rates… and Reuters says the yearly tab climbs to roughly $1.03 trillion by 2030.
There’s a lot hitting the market at the same time, and it all starts coming to a head next Tuesday. The point is, the time to prepare is NOW.
Since 1950, there have been 19 midterm elections.
12 months after every single one, the S&P 500 was higher. That includes recessions, wars, and everything in between.
According to Capital Group, the average gain over those 12 months was 15.4%.
But the road there isn’t always smooth. Morgan Stanley’s data going back to 1930 shows stocks tend to tread water in the year leading up to a midterm, often dip briefly as the results become clear, and then start to rally about a month later.
It also helps explain why the market can feel so stuck right now. A midterm year is the second year of a president’s term, and Morgan Stanley says the S&P 500 has averaged just 3% in year two. Year three? It’s been the best of the four-year cycle, averaging 14%.
And as Election Day gets closer, keep in mind that political gridlock isn’t necessarily bad for investors.
Since 1930, the S&P 500 has gained an average of 13% in the 12 months after a midterm, according to Morgan Stanley. With a Republican president, a split Congress has historically produced gains of about 23%… while a fully Republican Congress has averaged a 10% decline.
The difference between those two outcomes is 33 percentage points.
So no matter what happens in November, political gridlock has been a good thing for Wall Street.
And honestly… I’m hoping for one.
Morgan Stanley agrees with me. Right now, a split Congress is exactly what a lot of Wall Street is expecting.
Morgan Stanley’s base case is a Democratic House and a Republican Senate. Republicans hold their narrowest House majority since 1930… and since 1922, the president’s party has lost an average of 30 House seats in midterm elections.
In that scenario, Morgan Stanley sees defense, tech, and financials as potential winners from policy stability… while energy, healthcare, and private equity could face more scrutiny.
But here’s the catch… when everybody’s leaning the same way, a surprise can hit hard. If expectations suddenly swing toward a sweep by either party, the market could move fast.
With so many other forces hitting the market at once, you need a plan ready for whatever result we get.
Something’s gotta give… which is why I expect more volatility in the months ahead.
Nate Bear has a plan for it. Today at 2 p.m. ET, he’s going live with Ryan Fitzwater for the Midterm Money Shock Summit, the same hour the Fed announces its decision.
He’ll reveal the trade he plans to send out at noon on November 4, the day after the vote… and it’s your chance to double your money in about a week.
The Summit is free, so grab your seat before 2 p.m. ET.
