Midterm election years: choppy with a strong Q4 rally
What this chart shows:
This chart shows the S&P 500’s typical path through the four-year presidential cycle. It highlights the unique volatility of "Year 2" (Midterms) compared to the long-term historical average of all years since 1950.
Why it matters:
Midterm years are notoriously the "choppiest" phase of the presidential cycle, seeing an average intra-year drawdown of -17.5% as political uncertainty impacts sentiment. However, history shows this volatility is often followed by a robust recovery in Q4.
Staying the course through seasonal turbulence has often been the key to capturing both the Q4 rally and the transition into Year 3, which has historically been the strongest year of the entire four-year presidential cycle.
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